It's that time of the year. Again, tax season is coming up.
If you're fairly new in business, this might be totally new to you.
In this video I want to share with you eight small business tax write offs.
These are things you can deduct from your Texas and the goal is to deduct as
much as possible so you can get the most of your tax return earnings.
Hey, my name is Mei and I help makers,
artists and designers create a consistent income from selling their handmade
products online.
Before I share with you my list of tax deductibles,
I need to say that I am not a tax expert or accountant.
I have however,
been doing my own taxes ever since I came here to the United States 10 years
ago,
so I'm very familiar with this kind of stuff and I do also have a math degree so
you can trust that you are in good hands. Number one,
this is a fairly new rule as of 2018 called the qualified business income
deduction,
which says that you can now deduct 20% of your income.
That's pretty nice, right?
The requirement is that you must make under a certain amount of income in order
to qualify for this deductible. The number is pretty high,
but it also changes every year. So if you want the most updated figure,
definitely check out the IRS website. So here's an example of this.
Let's say you made $20,000 last year in sales and $8,000 or business expenses.
That means you had a profit of $12,000 you can deduct 20% of that profit,
which is $2,400 just like that.
You have a $2,400 deductible, not bad.
Number two, you probably work from home, right?
If you have a space in your house or apartment that's exclusively dedicated to
just your business, you can deduct that.
You can deduct things like your mortgage, interest, insurance,
utility bills and repairs.
And there's a simplified method for how you do this.
And that's by taking $5 multiplied by however many square foot is the size of
your home office.
So if your craft room is like 15 feet by 10 feet,
that's 150 square feet.
You take that and multiply by five and from that you can deduct $750 just keep
in mind that you can only deduct up to a maximum of $1,500.
Number three did you know that you can deduct mileage for driving to craft shows
and markets and other trips that you might take that's business related.
For example, driving to the craft store to buy materials, supplies.
This is why it's a good habit to start tracking or writing down every trip you
make to where and when so you can easily calculate this during tax time.
I keep everything for wherever I go in my Google calendar.
When you know where you've been,
you can bring up Google maps to figure out the miles you've driven for that
specific craft show for example,
so you're going to total up all the miles you've driven in the last year.
Once you have that number,
there are two ways to deduct this and I like using the first way,
which is using the standard mileage rate. It's so easy.
You just take all the miles you've driven and multiply that by the IRS as
standard deduction rate for the year,
so the rate for this year is 57.5 cents per mile,
so if you've driven a hundred miles that is business related,
you can deduct $57 and 50 cents.
This is especially impactful for you if you do a lot of craft shows and events
and if you travel to do certain shows,
you definitely want to deduct your mileage number for education.
This is one of my favorite things to deduct because I love taking courses and
learning from other people. If you're like me,
whatever courses you signed up for, maybe it's my signature course,
a Sale a Day Business System,
you can deduct the price of the course from your taxes or if you got coaching
from someone else or if you've bought business books or if you have a creative
live subscription. These are all tax write offs for your business.
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on YouTube. All right? Number five software, your website,
whether that's on Shopify, Wix, Squarespace, whatever it is you use,
that is deductible. Any apps you've got installed on your site that you pay for,
if you pay for an email service like MailChimp or MailerLite,
if you have a shipping service like ShipStation or Endicia,
if you have social media software like Planoly or later for scheduling,
Instagram posts, bookkeeping or inventory management software.
We use so much software these days to keep our business going.
All of these help you run your business and they can all be deducted.
Number six,
did you know that even taxes themselves can be deducted?
That's pretty meta, right?
I always thought this was kind of weird that you could do this,
but I'm not complaining because remember, the more you deduct,
the more money you get back from tax returns.
So when you're in business for yourself,
you have to pay what's called a self employment tax.
This tax includes social security and Medicare,
which you would normally have to pay for anyway if you have a job and you're
employed by someone else.
So just because you're self employed doesn't mean you can't avoid paying for
those things. So when I say that taxes can be deducted,
you can deduct part of your self employment tax and even your sales tax or state
income tax. Number seven, marketing and advertising expenses.
Whatever you spend on in your business that has the purpose of promoting your
business, like business cards, postcards, doing paid Facebook ads,
those can all be deducted for me,
I spend a lot of money on paid ads so I can deduct a lot from this category.
Number eight,
even your business related meals can also be deducted.
So say for example you're traveling for a multiple day craft show.
Say it's a 10 hour show and you've bought lunch from the food truck, the show,
you can deduct 50% of the cost of your lunch for being at the crash room.
Generally speaking,
if you bought something that was used to benefit your business and you can
document the reasons for it, you can deduct that off your business income.
For example, if I'm about to speak at an event, I might get my hair,
makeup and nails done. Normally you wouldn't ever deduct those,
but the fact that this was done for the business event,
I can deduct those costs for that special location.
So that's my list of eight things that you may not know about that you can write
off. Of course there is so much more you can deduct like your materials,
supplies,
equipment if you've hired help from freelancers or independent contractors,
those are all deductible.
Don't panic if all of this sounds super confusing.
I highly recommend using tax software to help with all of this because it can
often help you spot deductions that you otherwise wouldn't know. To me,
we use turbo tax and we love it. Before using software,
we were filling everything in digitally using PDFs and calculators and it would
take us an entire weekend to do this. But with the help of software,
we can often finish our taxes in just one afternoon.