The Small Business Expense Tracker - Appendix

7. Expenses
What You Can Legally Deduct as a Small Business Owner:
Schedule C Categories and Examples:
Commission and Fees
Expenses
Advertising
Pension and profit sharing plans
Car and Truck Expenses Contract Labor
Depreciation and section 179 expense deduction
Insurance (other than health) a. Mortgage
Legal and professional services
Rent or lease
Vehicles, machinery, and equipment
Other business property
Supplies
Repairs and maintenance
Taxes and licenses
Travel, meals, and entertainment
a. Travel
b. Deductible meals and entertainment
Utilities
Wages (less employment credits)
Depletion
Employee benefit programs
Interest:
b. Other
Office Expense
Other Expenses
Advertising: Card decals, business cards, Facebook ads, Instagram ads, Linked-In, Meetup, Eventbrite, mailers, brochures, handouts, newspapers, blogs, forums, lead generations, websites, and internet ads.
Tip – Using Paypal to pay for these items will make it easier to stay organized and it will ensure that you always have the proper documentation needed to prove the expense.
Car and Truck Expenses: Standard mileage (53.5 cents per mile) or actual
mileage, depreciation, licenses, registration fee, repairs, tires, lease payments,
interest, gas, oil changes, maintenance, inspections, garage fees, tires, parking
and tolls.
Tip – It is important to get your mileage on your vehicle(s) at the beginning of the
year because you will have to report the beginning mileage and ending mileage
on your Schedule C. To get your business miles driven for the year divide your


vehicle mileage between your personal use of the car and your business use of
the car. The business miles are what you multiply by the 53.5 cents. Don’t forget
to include miles to get supplies and for going to the post office!
Example – You are a contractor and drive your car 20,000 miles during the year: 12,000milesforbusinessuseand8,000milesforpersonaluse. Youcanclaim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense for actual.
Tip – If you itemize your deductions on a Schedule A (Form 1040), you can deduct on line 7 (state and local personal property taxes on motor vehicles). You can take this deduction even if you use the standard mileage rate or if you do not use the car for business.
Tip – If you took the actual mileage your first year in business, you will not be able
to switch to the standard mileage in subsequent years. Do not leave money on
the table. Take the time do the math and see which will keep more money in
your pocket.
Tip – Do not forget to deduct your expense for picking up supplies and going to
the post office. Also, if you do not travel much in your business take the actual
deduction, but if you travel often that mileage adds up so take the standard rate.
It just depends on which is more profitable for you!
Contract labor: Website design, technical fees, website designs, logos, editors’
fees, etc.
Tip – Hire your kids for the summer! They do not have to pay taxes if they are
under 17 years old and make less that $6,300 for the year. You can write off their
pay as a business expense and you do not have to withhold any payroll taxes
when paying children under the age of 18. This provision only applies to Sole
Proprietorships or a Limited Liability Company (LLC) taxed as a partnership and
owned by mom and/or dad. The best part of hiring your kids for the summer is
that none of us, including our children, pay federal income taxes on the first
$6,300 of income this year because of the Standard Deduction. Make sure that
you do not pay your children more than $6,300 EACH for the year! A huge BONUS
is that you can still claim your children on your tax return as a dependent and take
the exemption and the Child Tax Credit. Just be sure to put them to work and


give them their responsibilities for the job in writing, keep track of their hours
worked, and make sure their hourly wage is consistent to the workload given.
The IRS is all about proper documentations so should the IRS audit you, you will
have to produce records of their time worked, and you will have to demonstrate
that the wages paid were reasonable for the work performed.
Example of our kid’s responsibilities: When prospects show up to our home for
business-related services, my children’s responsibilities include entertaining the
prospect’s children, cleaning the presentation and entertainment room before
and after each meeting, stocking shelves with snacks and beverages and cabinets
with paperwork, and making sure we have pencils and pens available.
Hiring your children for the summer and during spring break is a good money
saving strategy for you and is a great way to teach your kids some work ethic,
money-management skills, and kick start their retirement or college savings plan
or let them pay for their own way on that family vacation.
Insurance other than health: Business insurance, extra car insurance on your
vehicle to cover your business, long-term care insurance, supplemental insurance.
Interest: Business Loan Interest, Credit Card purchases interest, bank fees.
TIP – If you own a property and have a small business but do not qualify for the
home office deduction on your Schedule C, you are still able to deduct mortgage
interest on the Form 1040 (you cannot deduct it from both).
Depreciation 179 expense deduction: Section 179 of the IRS tax code allows
businesses to deduct the full purchase price of qualifying equipment and/or
software purchased or financed during the tax year. That means that if you buy
(or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE
PRICE from your gross income. You can also choose to depreciate it. The point is
to look for the most economical way for you to do the deduction.
Legal and professional: LegalZoom, lawyer fees.
Office expenses: Pens, pencils, printer ink, printer paper, post it notes, binders,
label makers, mouse pad, labels.


Rent or lease: If you rent your place and use it as a home office you may be able
to deduct a portion of your rent payments, also any office spaced you leased to
conduct business will also fall under this category. The important thing is to
ensure that you do not deduct more than you make AND that you actually use the
space in your home for business. No worries the way the tax software is set up
even if you input the information the system will not give you the deduction if you
made less than you expensed, I just do not want you to go through the hassle of
keeping up with all that documentation for nothing.
Supplies: Computer, printer, computer desk, mouse, chair, label makers,
groceries.
Taxes and licenses: Renewal fee, certifications, Social Security taxes paid (as a
business owner you must pay owner and employee taxes (Self Employment
Taxes) up front but are able to write off 50% of this as a business expense).
Travel: Hotels/motels, Air BnBs, rental houses, Uber, Lyft, taxi, flights, trains,
mileage, rental cars, bail hoppers, baggage people, tips.
Deductible Meals: Restaurants.
*Remember when traveling you can take the standard rate for meals, in most
cases this will be more money back in your pocket than taking the actual rate and
you do not have to keep up with receipts. Less work more money especially if you
and your spouse are traveling together. To find the standard rate for the area you
are traveling to go to https://www.gsa.gov/travel/plan-book/per-diem-rates
Example for Meals while away for Business:
Scenario: You are at a convention in Dallas, TX in March with your spouse and you eat 3 times a day:
Actual Rate: Breakfast was $20.00 Lunch was $80.00 Dinner was $130 Total: $230
You get to deduct half: $115.00
Standard rate:
$64.00 dollars a day per person: $128.00
With standard, you do not need receipts.


Which would you prefer?
Utilities: Electricity, water, sewage, gas.
TIP – These deductions are only taken IF you use your home for business AND if
you make more money than you expense!
Other Expenses: Conventions fees, Trainings, Seminars such as Eric Worre, Peter
Voogdt, Ray Higdon, Coaching, Success Club, Toast Masters, John Maxwell, etc.
Apps and Subscriptions: Internet, Wi-Fi Hotspot, Audible, LinkedIn, Meetup,
Eventbrite, Microsoft Office, Success Club, Mile IQ, Everlance, DropBox, Zoom,
YouTube, ICloud Storage, TNAllAccess, PayPal (if used for business), Software
Postage: USPS, UPS, FedEX, Gifts.
Promotions: Offering items to prospects that act now ($500 off), Expense
Trackers or memo books, iPads or notebooks with training material on it, etc.
Other: Social Security and IRA Contributions.
Home Office: Security systems, cleaning services, home repairs, utilities, insurance. The percentage of your home used for business is the percentage of the bill that is deductible.
Tip – Be smart and put more money in your pocket. Considered claiming your pet (pet food, vet bills, treats, and other needs that keep Fido in good proper working order) as your security or your actual alarm system. Keep in mind you cannot claim your pet and a separate home system. Figure out what is more cost effective for you.
Tip – Business owners are required to pay both the employer and employee
portion for Social Security taxes. However, as a business owner you can expense
the employer portion. Meaning, whatever you paid into SSD, you can deduct half
of it.


8. Travel Expenses You Can Deduct
Travel Outside the United States. If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. For this purpose, the United States includes the 50 states and the District of Columbia.
How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related.
Travel Outside Entirely for Business or Considered Entirely for Business. You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business.
Travel Entirely for Business. If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses.
Travel Considered Entirely for Business. Even if you did not spend your entire time on business activities, your trip is “Considered Entirely” for business if you meet at least one of the following four exceptions.
Exception 1 – No substantial control. Your trip is “Considered Entirely” if you did not have substantial control over arranging the trip. The fact that you control the timing of your trip does not mean that you have substantial control over arranging your trip. You do not have substantial control over your trip if you:
• Are an employee who was reimbursed or paid a travel expense allowance, and
• Not related to your employer, or
• Not a managing executive
Exception 2 – Outside United States no more than a week. Your trip is “Considered Entirely” if you were outside the United States for a week or less, combining business and nonbusiness activities. One week means seven (7) consecutive days. In counting the days, do not count the day you leave the United States, but do count the day you return to the United States.
Exception 3 – Less than 25% of time on personal activities. Your trip is “Considered Entirely” if:


• You were outside the United States for more than a week, and
• You spent less than 25% of the total time you were outside the United
States on nonbusiness activities.
Exception 4 – Vacation not a major consideration. Your trip is “Considered Entirely” if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip.
Travel Primarily for Personal Reasons. If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses directly related to your business.
Luxury Water Travel. If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. The limit is twice the highest federal per diem rate allowable at the time of your travel.
Meals During Travel. You can deduct the cost of meals in either of the following situations.
• It is necessary for you to stop for substantial sleep or rest in order to perform your duties while traveling away from home on business.
• The meal is business-related entertainment.
Lavish or extravagant. You cannot deduct expenses for meals that are lavish or extravagant. An expense is not lavish or extravagant if it is reasonable based on the facts and circumstances.
You can figure your meals expense using either of the following methods:
• Actual cost.
• The standard meal allowances.
Actual Cost. You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, you must keep records of your actual cost.


Standard Meal Allowance. Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel.
Incidental expenses. The term “incidental expenses” means fees and tips given to porters,baggagecarriers,hotelstaff,andstaffonships. Incidentalexpenses don’t include expenses for cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business, places where you eat meals, the mailing cost of filing travel vouchers, and paying employer-sponsored charge card billings.
Conventions. You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. You cannot deduct the travel expenses for your family.
Conventions Held Outside the North American Area. You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:
• The meeting is directly related to your trade or business, and
• It is reasonable to hold the meeting outside the North American area
Cruise Ships. You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are cruise ships.
Entertainment. As of 2018, meals are the only form of expenses under entertainment. This includes the cost of a meal you provide to a customer or client. A meal expense includes the cost of food, beverages, taxes, and tips for the meal. To deduct an entertainment-related meal, you or your employee must be present during the meal or drinks.
50% Limit. In general, you can deduct only 50% of your business-related meal and expenses.


How to order your Tax Saving Documents:
www.thesmallbusinessexpensetracker.com
The SB Schedule C Guide
The SB Excel Workbook (2017 & 2018)
The Small Business Expense Tracker
Facebook Page: The Small Business Expense Tracker
Facebook Group: Small Business Tax Assistance