Now is the time to plan your home business tax deductions. Here are 5 to consider for the rest of the year.
Now that you've almost a month to recover from Tax Day, it's time to look forward for the rest of the year. It's a good time to plan your home business tax deductions going forward so that you know what to expect — and so that you aren't scrambling to figure things out in December. It's always preferable to engage in year-round tax planning.
As you consider how to maximize your home business tax deductions for the rest of the year, here are five?things to keep in mind:
1. Buy New Home Office Equipment
I recently bought a new computer for my home business. Last year, I bought a new chair. Look ahead. Is there new home office equipment that you could use? What about office supplies? If you have been thinking about buying something new for your home office, now is a good time to plan ahead. If you like to save up for expensive items for your home office, planning now gives you enough time to save up by the end of the year. I'm thinking of buying some nice equipment for podcasting, so I might need to save up for that. Make a plan now, so that you can buy what you need for your home office before the end of the year, rather than frantically trying to pay for it with credit in December.
2. Plan to Attend at Least One Conference
This can be another situation in which you need to plan ahead. Attending a conference can help your home business by allowing you to network as well as helping you learn something new that can help your home business thrive. Look ahead to the last half of the year. Is there a conference that would help your business?
In order to deduct the costs of your conference, you need to make sure that it has to do with your business. I write about finances, and I'm a professional blogger, so it makes sense for me to attend FinCon and NMX. You can deduct the cost of airfare, ground transportation, accommodations, conference fees, and other travel-related items. You can even deduct 50 percent of your meals. However, you should keep all of your receipts, documenting everything. You need to be able to show that you really did spend that money on a business trip.
3. Consider Your Health Insurance Options
We still have health insurance as a family, individually bought, because my husband has yet to get a job with benefits. Since we get the health insurance through my home business, we get a tax deduction for health insurance costs.
Now is a good time to consider your health insurance options, and figure out what to do next. While open enrollment for ACA plans is closed, and open enrollment for other plans might not be until the fall, it doesn't mean that you can't research your options right now. Do some research to see if you might qualify to purchase health insurance on an exchange; you might even qualify for a subsidy. If your partner has access to health coverage, it makes sense to look at what's available and see if it is worth switching things up. Run the numbers now so that you are ready for open enrollment and the possible tax deduction.
4. Lunch with Clients
I don't like to have clients over to my home office. I can fake a professional home office on video, but actually having someone here in person? If you take clients to lunch, you can deduction half the cost of the meal, as long as it's reasonable. So, if you are looking for a professional and fun way to close a deal or make a pitch, consider taking your clients to lunch. Of course, you need to make sure it's a reasonable meal. No ordering $200 bottles of wine or the most expensive surf and turf there is. But if you spend $100 on a reasonable dinner with your client, you can deduct $50 of it. Keep the receipt, and jot notes about what you discussed on the back. You need to document that this truly was a business meeting.
5. Consider Your Business Structure
My business is set up as a Limited Liability Company (LLC). Others I know have their companies set up as S-Corporations. In any case, it can make sense to move from a sole proprietorship to another business organization. Consult with a knowledgeable small business tax professional who can help you determine if you might be better off with a different structure. A different structure might mean more paperwork and better payroll records, but it might also save you a great deal when it comes to self-employment taxes.