The Only Cheat Sheet for LLC Expenses + Taxes You Need

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The Only Cheat Sheet for LLC Expenses + Taxes You Need

Table of Contents

Doing taxes for your small business can be confusing, time-consuming, and daunting. But with the knowledge contained in our LLC expenses cheat sheet, you can navigate tax season like a pro and reduce your taxable income in the process.

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20 Tax Write-Offs for Your LLC

Want to know what expenses can you write off as an LLC? As it turns out, there are plenty of money-saving possibilities.

1. Car Expenses and Mileage

If you use your car for business purposes, you can write it off on your taxes. And when we say "write it off," we mean you can deduct its:

  • Depreciation (or lease payments)
  • Tires
  • Repairs and maintenance
  • Gas and oil
  • Insurance payments
  • Registration fees
  • Loan interest
  • Property tax
  • Parking fees and tolls

And if you use your car for business and personal purposes, you can still deduct the business portion of its expenses. To simplify that process, you can use the standard mileage rate instead of calculating the exact dollar amount.

2. Meal Expenses

If you frequently meet with clients, vendors, or other business associates over a meal (or just need to purchase food while you're on the road for business purposes), you can deduct the cost of those meals from your taxes.

Just be sure to save your receipts if you plan on deducting the actual cost of all your business-related meals, or else you'll need to use the standard meal allowance instead.

Note: You can usually only deduct 50% of the cost of each meal, and anything considered lavish or extravagant won't qualify for a deduction.

3. Home Office Expenses

Do you use a portion of your home as an office? Then you can write off its cost on your taxes as long as you meet the following requirements:

  • Your home office is used exclusively and regularly for your business.
  • Your home office is either your principal place of business, a place where you regularly meet with clients or customers, or a separate structure used in your business.

When calculating the portion of your rent or mortgage payment that you can write off as a home office expense, you also have the option to use the IRS' simplified home office deduction formula.

4. Travel Expenses

Airfare, hotel fees, and meals are just some of the business-related travel expenses you can deduct from your taxes. Other possible write-offs include:

  • Taxi, train, bus, or ride-sharing fares
  • Baggage shipping costs
  • Car rental fees
  • Dry cleaning and laundry fees
  • Communication fees, such as roaming charges

5. Office Supplies

Standard office items you purchase to keep your business running smoothly can all be deducted from your taxes.

These may include:

  • Pens and pencils
  • Printers and copy machines
  • Printer ink and toner
  • Paper, envelopes, and stamps
  • Scissors, hole punches, and staplers

Keep in mind you can also write off all or part of the computer and software you use for business purposes.

6. Phone and Internet Service

If you need an internet connection, cell service, and/or landline to run your business, then you can write them off as business expenses.

But if you use those services for both business and personal purposes, remember you can only write off the percentage used for business.

7. Medical Expenses

Insurance payments and medical care can be expensive, but being able to deduct their costs from your taxes can help ease the burden.

For instance, the IRS' self-employed health insurance deduction ensures self-employed people can write off the cost of medical and dental insurance and qualifying long-term care insurance for themselves and certain members of their families.

You can deduct medical and dental expenses, too, but only if they exceed 7.5% of your adjusted gross income.

8. Childcare

Do you pay a babysitter, daycare provider, nanny, or other childcare professional to look after your child while you work? You can deduct that expense from your taxes.

According to the IRS' childcare guidelines, you'll be required to report the name, address, and Taxpayer Identification Number (TIN) of the person or organization providing childcare to you and your child, so remember to take note of them.

9. Professional Service Expenses

If you use professional services to keep your business up and running, get ready to deduct their cost from your taxes.

These can include your:

10. Startup Costs

Starting a business can strain your bank account, but you'll be glad to know you can write off some of those startup costs come tax season.

Deductible startup costs include:

  • Advertising and marketing your business' opening
  • Market and competitor analysis
  • Travel costs associated with meeting potential suppliers, customers, and distributors
  • Employee training

11. Business-Related Education

As your business grows and evolves, you may find yourself needing to expand your knowledge base through various forms of education.

And when you do, you can deduct the cost of that education from your taxes. Specifically, you can write off the cost of:

  • Tuition
  • Textbooks, class supplies, and the like
  • Education-related transportation and travel

12. Business Interest and Fees

If you have a business bank account, line of credit, loan, or credit card, it probably comes with interest and various fees.

Fortunately, you can write them all off on your taxes. That includes service fees, loan interest, monthly bank fees, and more.

13. Business Insurance

There are many types of business insurance your LLC may need, and their costs can add up. To help mitigate them, why not write them off when tax time rolls around?

Remember to deduct your:

  • General business liability insurance
  • Business interruption insurance
  • Property insurance
  • Cyber liability insurance
  • Product liability insurance
  • Professional liability insurance
  • Any other insurance plan your business has

14. Depreciation

If you've purchased a big-ticket item to ensure your business's success, you may be able to deduct the cost of its depreciation from your taxes.

For instance, depreciable items include:

  • Vehicles, such as a delivery van or business car
  • Furniture, such as waiting room chairs
  • Equipment, such as commercial washers and dryers for a laundromat
  • Machinery, such as cement mixers
  • Buildings, such as a warehouse for a brewery

15. Employee Pay

Did you know you can deduct your employees' pay from your taxes? It's true, and it can even include:

16. Charitable Contributions

Just as your individual charitable contributions are tax-deductible, so too are those of your business.

If your LLC is taxed as a pass-through entity, you can claim your contributions on Schedule A of Form 1040. But if your business is taxed as a C Corp, you can do so on Form 1120 and Form 8283.

And if your LLC is taxed as an S Corp, you'll do so on Form 1120-S.

17. Self-Employment Tax

With a total rate of 15.3% divided between social security and Medicare, self-employment tax can be pricey. But what some self-employed entrepreneurs may not know is that you can deduct the employer-equivalent portion of your self-employment taxes from your income tax return.

In simpler terms, you can deduct 50% of your self-employment taxes. That's because employers usually pay half (7.65%) of an employee's social security and Medicare taxes.

18. Retirement Contributions

Depending on the type of retirement plan you have, you may be able to deduct your contributions to it from your taxes.

As the IRS explains, contributions to Roth IRAs are not tax-deductible. However, contributions to traditional IRAs are tax-deductible in the year they're made, and if your traditional IRA isn't provided by an employer (or your spouse's employer), you may be able to deduct your entire contribution.

To find out if your traditional IRA contributions are either fully or partially deductible, check the IRS' deduction limits chart.

19. Capital Losses

As long as your LLC is taxed as a pass-through entity and not as a C Corp, you can deduct up to $3,000 in capital losses from your tax return (or up to $1,500 if married filing separately).

Not sure what a capital loss is? No problem: A business experiences a capital loss when one of its investments or capital assets decreases in value. For instance, let's say you buy a piece of heavy machinery for $10,000 in January, but by August, you're only able to sell it for $5,000.

That would constitute a capital loss of $5,000, of which $1,500–$3,000 you might be able to write off on your taxes.

20. Bad Debts

Does someone owe money to your business? Do you know you won't be able to collect it? You may have bad debt on your hands.

For instance, bad debts can occur as a result of:

  • Loaning money to employees, suppliers, or clients
  • Making credit sales to customers (i.e., sales that customers agree to pay for at a later date)
  • Business loan guarantees (i.e., loans you've agreed to assume responsibility for if the lendee fails to pay)

For more help identifying bad debts and learning how to deduct them, see the IRS' detailed documentation.

What’s the Difference Between Tax Deductions and Tax Credits?

Tax deductions reduce your total amount of taxable income. Tax credits, on the other hand, can reduce your final tax bill.

Here's what that means:

It may take some time to determine which credits you're eligible for and which you aren't, but the end result of a lighter tax bill will be well worth the effort.

What Expenses Can I Claim Without Receipts?

If you don't have receipts for the business expenses you claim on your tax return, you could run into a major headache if the IRS selects you for an audit later down the line.

But fortunately, not every type of business expense must be accompanied by a receipt. Thanks to a rule called the Cohan rule, other types of reasonable proof can also suffice.

For example, let's say you claim a deduction of $800 for business supplies such as a new printer, paper, ink, and the like. However, you don't have the original receipts to prove those expenses, and you end up getting selected for an IRS audit.

In such a scenario, you could prove those expenses by providing a credit card statement showing the purchases you made to an office supply store. Or, you could provide transaction records from your bank's online portal.

So with that in mind, you can claim many business expenses without receipts — you just need to have another form of proof on hand instead.

However, it's important to note that the Cohan rule doesn't apply to all types of expenses. Specifically, it doesn't apply to the deductions listed under section 274(d) of the Internal Revenue Code. Those include:

  • Travel expenses
  • Gift expenses
  • A passenger car or any other property listed under section 280F(d)(4)

Additional Tax Resources

Feeling overwhelmed by your LLC's taxes, expenses, and deductions? You're not alone, and there are plenty of free and low-cost tax resources that can help.

And if you'd prefer to put your business taxes in the hands of a professional, remember you can always use Incfile's Accounting and Bookkeeping service. It's affordable, convenient, and comprehensive, and all packages come with unlimited tax consultation, so you'll never be left in the dark.

Bookkeeping & Accounting | Incfile

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