You just recently had your personal and/or business taxes filed and now you’re reviewing your previous year’s expenses and asking yourself why couldn’t I write off that gift I bought my client? Or that meal? As a general rule, a business can write off any ordinary and necessary expense it incurs. These are quality questions that you wish you had someone to explain to you. Here are some of the common questions many bookkeepers and accountants are asked during tax season.
Gifts for Customers
Business gifts are deductible – but to a very limited extent. The IRS allows taxpayers to deduct the first $25 worth of gifts to a customer. That means if you give a $25 gift to 10 different customers, you could take a total deduction of $250. But if you give a $250 gift to one client, you could only deduct $25.
Unless it’s a uniform you have to wear for work or a form of protective equipment, clothing or shoes you buy for work aren’t deductible. (I have more on this in another article, “Cost of Employer-Required Clothes”) http://agilpinconsultants.com/cost-of-employer-required-clothes-not-deductible/
Travel – Mileage / Commute
If you travel for business using your own vehicle, feel free to deduct the mileage at the IRS standard rate. Your commute to your place of business, however, cannot be deducted. To account for this, you need to subtract the length of your commute if you visit a client site instead of your place of work.
Tool: Using a mileage tracker to separate personal from business can save you time, aggravation and money. With today’s smartphones and apps the one I suggest to my clients is MileIQ https://dashboard.mileiq.com/signup?ref=CCAZU
If you take a client out to lunch, you can deduct half of the cost as meals and entertainment expenses. However, if it is just you, or if the lunch has no business connection to it, it’s not deductible.
You can get a write-off if your business donates to a registered 501(c)3 charity, however, you cannot deduct donations made to a political organization or a political candidate.
Understanding your donation types, as not all donations are created equal.
A cash or check donation is deductible with proof of the donation.
Volunteered services are not deductible. You can, however, deduct the cost of any expenses incurred while volunteering.
Mileage incurring while volunteering is deductible as long as you weren’t traveling to the location for any other purpose. The rate for charitable mileage donations change yearly so visit the IRS site for updated rates: https://www.irs.gov/tax-professionals/standard-mileage-rates/
Donations of goods, services, or property are deductible. For example: If the organization gives your business anything in return for your donation, deduct its value from your gift. For example, if you make a $500 donation to a community organization and they gave you a one-page advertisement in a publication, deduct the fair market value of the ad space from your donation.
For more IRS publications and tax guides visit the IRS Publications Online at https://www.irs.gov/publications/index.html