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.
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)
Repairs and maintenance
Gas and oil
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.
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.
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.
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)
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:
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.
Carrie Buchholz-Powers is a Colorado-based writer who’s been creating content since 2013. From digital marketing to ecommerce to land conservation, she has experience in a wide range of fields and loves learning about them all. Carrie is fond of history, animals and beauty in equal measure. In her free time, she enjoys knitting, playing video games and exploring Colorado's prairies and mountains with her husband.