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Business Expenses & Tax Deductions for Small Business That You DON'T Want to Miss - YouTube
Channel: All Up In Yo' Business with Attorney Aiden Durham
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hi everyone I'm attorney 8 in Durham
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with 180 la Co in Denver Colorado and
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you're watching all up in your business
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[Music]
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on this episode of all up in your
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business we're gonna talk about tax
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deductions that your small business
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definitely doesn't want to miss in 2020
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and when they talk about in 2020 I'm
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talking about filing taxes in 2020 for
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2019 first I'm going to give you some
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deductions that you want to take
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advantage of this year but then I'm
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going to talk about a few deductions
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that you can use in planning for next
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year and how to minimize your taxes for
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next year but before we get into it
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please be sure to LIKE subscribe and
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share Cebu Play and check the
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description for some additional
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information and I've got some freebie
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downloads and check sheets and stuff
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there too all right
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taxes first a little bit of background
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information you can kind of but not
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technically deduct pretty much all costs
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associated with running your business
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now obviously there are rules and
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exclusions to all of this and exactly
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how it works but ultimately you're able
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to recover in one way or another the
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costs that you spend in your business
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now technically speaking some costs can
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be deducted but some which are
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considered capital expenses have to be
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capitalized rather than deducted which
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just means they have to be amortized or
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depreciated amortized means you deduct
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it over the series of a few years so
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instead of taking a $10,000 deduction
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you take a $2,000 deduction over five
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years amortize that deduction and then
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depreciation is kind of the opposite you
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get to deduct the loss in that asset
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over the period of a certain amount of
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years so I'll be using the term deduct
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or deduction throughout this video but
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sometimes in some circumstances it's not
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actually a deduction it's a capital
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expense which needs to be capitalized so
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what can be deducted
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from your business the kind of general
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rule the general rule of thumb is that
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you can deduct anything that is ordinary
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and necessary for your business now if
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something is ordinary the IRS says that
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that means it's common and accepted in
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your industry and if it's necessary the
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IRS says that that's helpful and
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appropriate so for the most part if
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something is ordinary and necessary you
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can deduct the cost from your business
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for this year for preparing your taxes
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for 2019 here are some really important
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tax deductions that you do not want to
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miss first off you can deduct at the
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costs of going into business the IRS
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allows you to deduct your startup costs
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and your organizational costs so startup
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costs are things like buying supplies
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market research advertising travel
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that's needed any ordinary and necessary
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expenses that are incurred once you're
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in the process of starting your business
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and then organizational costs are gonna
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be like filing fees and professional
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fees like legal and accounting costs you
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can even deduct your startup costs if
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your business is unsuccessful so even if
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you try to start a business and it
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didn't work out you didn't make any
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income from it you can still take a
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deduction for the cost that you put into
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trying to start that business usually
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there are a couple of rules so the IRS
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says if you incurred those costs prior
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to making a decision to go into business
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or to start a business then those are
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personal expenses and you can't deduct
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them but any costs in your attempt to go
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into business once you made that
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decision to pursue going into business
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all of those costs are capital expenses
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and can be amortized so this is one of
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those situations where it's not a
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deduction exactly it's a capital expense
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but the IRS does allow you to deduct
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$5,000 of startup and organizational
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costs each so five thousand each
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so if you spent more than that in your
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organizational and startup costs then
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that's a situation where you'd want to
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amortize those expenses over a few years
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to take full advantage of those
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deductions next you can deduct the cost
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of your supplies and materials and just
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kind of general overhead and operating
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expenses so this will be your office
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supplies and incidental materials just
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random things you need in your office to
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operate your business it also includes
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like services and subscriptions apps
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that you need for your business so if
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you download some app that you have to
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use every day or if you use some
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subscription services to operate your
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business those are all deductible next
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you can deduct your costs for employees
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and contractors payroll expenses are
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fully deductible as are any kind of
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contractor expenses so if you have
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anyone on your team who's helping you
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out supporting your business those costs
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are deductible to equipment computers
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any kind of machines printers scanners
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those expenses are all deductible many
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instances they have to be depreciated
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depending on the type of equipment or
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the type of thing it is but when one way
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or another those expenses can be
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recovered of course you can deduct the
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cost of your rent if you rent an office
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or if you even rent a Pio box or if you
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have a virtual office that you use for
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your mailing address those costs are
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fully deductible two utilities and other
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services like that those are all
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deductible this applies if you have an
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office outside of your home if you pay
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water or electricity or any other
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utilities your internet bill your phone
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bill for that office those are all going
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to be deductible business expenses if
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you're making any retirement plan
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contributions as a solo business owner
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if you have a SEP IRA or a simple IRA or
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if it's just you you have no employees
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or anything and you have a solo 401k
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you can make tax deductible
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contributions to your retirement account
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and the nice thing with deducting these
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retirement contributions is you can make
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a deduction up to the day that you file
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your taxes so you don't have a deduction
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just for the contributions you made in
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the previous year
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you can take for that year a deduction
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for any contribution that you made up to
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the date of your filing one of my
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favorite deductible expenses is travel
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expenses if you travel for work if you
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travel for conferences or meetings or
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two sites or to work with clients those
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travel costs and travel expenses are
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going to be deductible this applies even
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if you use some personal time for that
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travel which is what I love to do if I
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have to go to a new city or go somewhere
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new for a work event I try to tack on a
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day or two to that trip so I can have
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some personal time and travel and
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sightsee and have some fun for myself
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now if you do that unfortunately you
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can't deduct the full cost of the trip
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if some of it is personal but so
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basically you just deducted the portion
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of the trip that was work-related so if
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you're gone for ten days and five of
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those days you spent in a conference
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five of the days you spent doing
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personal stuff then 50% of your travel
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costs and travel expenses can be
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deducted that includes your travel meals
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now meals there is a limit to what we
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can deduct whether it's a meal for
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traveling or a meal if you're taking a
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colleague or a client out to lunch any
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of those kind of marketing or
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entertainment meals those can be
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deducted up to fifty percent of the
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costs of that meal so you can't fully
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deduct the entire thing but fifty
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percent of those expenses are deductible
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to insurance costs are deductible as
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well so your liability insurance if you
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have errors and omissions insurance
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product liability insurance even your
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health insurance premiums can be a
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business deduction mileage is a big
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deduction that a lot of people can
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easily miss the mileage
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reimbursement rate for 2019 is 58 cents
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per mile so that means for any business
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related mileage you can take a deduction
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for 58 cents per mile now if you do this
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you want to be really careful that
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you're tracking your mileage properly
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because you can't take a deduction for
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all of your miles it's only the ones
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that are business-related
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so driving from your office to a meeting
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or driving between meeting locations or
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driving from your office to clients
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location all of that's business mileage
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now you can't usually deduct the cost of
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mileage between your home and your
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office but there is a little trick to
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getting around that and that is with a
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home office so if you do have a
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home-based office if you work in your
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home or if you work in your home and you
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have an outside office but you do a lot
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of work in your home you may be able to
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qualify for a home based office and take
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home office tax deductions
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now the deductions that you can take for
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in office in the home are really the
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same as the deductions that you can take
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if you have an outside traditional
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office it's just going to be not
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necessarily all of the expenses so with
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your home office you can take a
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proportion or a percentage of those
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costs depending on how much of the total
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home your office takes up so for
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simplicity's sake let's say your home
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the total square footage is a thousand
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square feet and your office takes up a
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hundred square feet of that total
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footage that means 10 percent of your
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home expenses can be deducted as
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business expenses so that includes your
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mortgage interest or your rent on your
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home your home insurance your home
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utilities electricity internet costs it
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can also apply to your cell phone bill
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even if you don't have a home office if
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you use your cell phone for 50% of the
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time it's business then 50% of your cell
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phone bill is a business expense but
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going back with the home office they
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and mileage if you have an office in
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your home and an outside office then now
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because your home is an office location
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that mileage between your home office
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and your other office can be deductible
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business mileage because it's now
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driving between offices rather than
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driving from your home to your office
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advertising costs of course are a
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deductible business expense
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whether it's Google ads or advertising
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for a billboard or to put a commercial
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on TV your advertising costs are going
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to be deductible to any expenses to
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attend conferences or meetings so of
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course your travel costs are included
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but the ticket price to attend that if
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you had to pay something for it that's
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going to be deductible as well credit
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card processing fees thankfully if we're
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if you accept payment over credit card
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we have a lot of fees that we have to
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pay to take those credit card payments
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those fees that we pay are going to be
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deductible at least a little bit to help
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offset how that affects our actual
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income educational costs can be
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deductible to not in all circumstances
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you can't just go back to school to get
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your bachelor's degree and have your
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business pay for it but you are allowed
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to deduct your educational cost if the
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education is to maintain or improve your
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current work skills or if you're
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required to complete that education so
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if you're in an industry like the legal
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profession or accounting profession
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where you have continuing education
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requirements those costs for attending
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those courses are going to be deductible
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your tax prep services those costs are
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deductible too so isn't that funny the
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cost that we put into preparing our
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taxes to figure out the deductions that
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money that we put in to figure out what
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we can deduct that money is deductible
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itself isn't that funny and then finally
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any kind of licensing or regulatory fees
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so again if you're in an industry like
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the legal profession or if you're a
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cosmetologist or something where you're
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licensed or governed by some
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licensing board than those fees and any
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renewals those are all going to be
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deductible for your business so those
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are some cost that you can take
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advantage of this year when you're
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filing your taxes for last year but
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looking forward let's say maybe 2019 if
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your taxes were a little bit higher than
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your liking there are things that we can
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do this year to plan for next year and
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hopefully try to minimize our taxes for
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next year the first one is start
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tracking your mileage now if you haven't
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already if you're not already taking
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advantage of that mileage deduction
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start tracking it now my favorite thing
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to do there's an app called mile IQ it
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is there's a free version or a paid
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version it's fantastic I've used it for
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five years if not more you just download
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the app put in your starting mileage and
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then it automatically tracks you when it
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senses that you're moving in a car it
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tracks your mileage and then you can
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categorize it as personal or business
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related and then it automatically
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calculates the deduction or the
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reimbursement rate for those miles so if
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you're not doing it already start that
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now so you can deduct your mileage next
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year another way to plan for next year's
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taxes start contributing to an HSA or a
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health savings account if you're on a
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high deductible health care plan you can
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contribute money to your HSA and those
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contributions will be tax deductible if
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you know that you have regular medical
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costs if you have a regular prescription
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that you get every week or every month
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you can factor that into your costs for
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the year and plan out how much you
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should put into your HSA for next year
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and if you're starting to get really
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busy and maybe you're starting to make a
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lot of money hire someone hire some help
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that's gonna take some weight off of you
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and it's going to give you an expense
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that you can deduct from your income
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next year you can also potentially limit
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your taxes by making an S corp election
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now it's a good time to talk with your
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CPA or your tax advisor to determine if
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making an S corp tax election will help
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you say for next year and then if you're
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a big-time baller and you're getting
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into a higher tax bracket if you're
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starting to make a lot more money and
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you're going into that higher tax
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bracket talk with your tax planner about
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what you can increase what expenses you
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can increase or what contributions you
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can make more of to lower your income so
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you're in a lower tax bracket that's all
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for this episode folks drop a comment
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below and let me know what you think
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also be sure to check out my blog for
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some more information and to learn more
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about small business tax deductions
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thank you all so much for watching
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I'm Aiden Durham and I'll see you next
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time
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