A very important part of bookkeeping is knowing what accounts you can use for your business write-offs. Today, I am going over the lists of common business expenses. It lists the description of the expenses. This is not a complete list. Your business may have other accounts that can be written off for your specific situation. It is always best to consult with a tax accountant to know if the business expense you are wanting to write off is a business expense that can be written off on taxes.
Advertising- Costs of promoting your business. For example, buy business cards to hand out at a networking event. Both the costs of the business cards and the networking event could be advertising expenses.
Business Insurance- insurance for your business. For example, all businesses should have liability insurance. The costs of getting liability and other business insurance go under business insurance. If you have an automobile for your business, the insurance for the automobile would be under a separate line, automobile business insurance.
Commissions and Fees- Commissions paid to employees. If you have employees who are paid commissions or other fees for work completed, it would go under commission and fees.
Contract Labor- Cost of labor for contractors (make sure you understand the differences between employees and contractors) For example, you have a contractor who helps you with packaging your inventory to get ready for orders.
Depreciation of Assets- Assets that must be depreciated over time are written off over several years. This one can be tricky. This is how you write off assets over time. It is usually between 5-7 years (but can be longer, it is based on the “lifetime” of the asset.) It is based on the date you purchased the asset and how much you paid for the asset then that is divided up by the years that it is usable. If an asset is no longer usable, you may have to write off the asset early. All of this should be consulted with your tax account to ensure you write the correct amount for your specific asset. There are many different types of depreciate calculations so you need assistance with these calculations.
Interest- Interest paid for business loans and business credit cards. For example, if you have a business credit card, you use it only for business expenses and then you do not pay it off monthly, so you incur interest on those expenses. The interest paid can be written off on your taxes.
Job Supplies- supplies used for a business-like nail, paint, and ect. that are bought and used for several projects. This does not include bigger purchases such as finished products that are bought for resale. These are supplies that are used to build the finished goods.
Mortgage for Office, storage, and or manufacturing center- If you own the location of your business then you have a business mortgage write-off. Keep in mind, this does not include your personal residence. This must be a business-owned asset.
Legal and Professional Services- Cost of legal and other professional support for your business. For example, you hire a bookkeeper to help you with your bookkeeping. The cost of those professional services is a business write-off.
Office Supplies- Supplies used in your office like paper, pens, paperclips, and ect. Keep in mind, this doesn’t include bigger purchases such as computers and desks. Usually, computers and desks need to be depreciated over the time frame they are considered to be still usable.
Rent or Lease of Office, storage, and or manufacturing center- The cost of renting your business office, storage, or manufacturing center. This does not include the rent cost for your personal residence. This is for the rent costs of business offices, storage, and or manufacturing centers.
Rent or Lease of Vehicles, Machinery, and Equipment- The cost of renting vehicles, machinery, or equipment used for business. This does not include the rent cost for your personal vehicles. This is for the rent costs of vehicles, machinery, and equipment.
Repairs and Maintenance- Repairs and Maintenance on your business office. Keep in mind, this does not include repairs and maintenance on your office at your personal residence. This is meant for when you are repairing or maintaining an office space for example that is used solely for your business.
Taxes and Licenses- Your business licenses and fees, and your personal taxes are reported as Owner's Equity. This one is very commonly confused. This does not include personal income taxes that are due every year on April 15th. These taxes are the taxes that are due from your business. Such as sales taxes that you pay on behalf of your customers. The employee taxes that you pay on behalf of your employees. The taxes that you pay as a corporation before the income is reported on your personal tax return.
Travel for business - Travel expenses for a business trip. Make sure it is a business trip. Any personal business should not be written off as business expenses. If you are traveling for business and then you stay a few extra days for personal recreation, the extra days of hotels and meals do not get included in travel expenses for your business.
Utilities- The cost of utilities of your business office or center. If you work from home, you do not write off your home utilities for bookkeeping, report to your CPA or EA the square footage of your home used for business and the total square footage of your home and you will take a percentage as a write-off on your taxes. This is a tricky one so if you need help calculating your home office expenses that can be written off on your taxes, it is best to talk to a tax accountant.
Vehicle Expenses* or mileage (Mileage not reported on P&L)- Report only vehicle expenses that are for business vehicles. If you are using a personal car for both your business and personal. Keep track of miles and report the miles used for business to your CPA or EA. This one too can be tricky. This is kept track of on your own. You will need to record what the business trips were for and why you went and or who you met with. At the end of the year, you will calculate the miles used for your business vs. what was used for personal and then you take a percentage of the cost of maintenance on your vehicle or you calculate the cost per mile that is allowed for the year by the IRS. Keep in mind, sometimes the rates change during the year so you will need to keep track of the dates so you can keep a record accordingly.
Business use of Home Office (Not reported on P&L) - See above for more details.
Percentage of Utilities based on square feet of home - See above for more details.
If you are an S Corporation talk to a CPA or EA about corporate rent in your area. This is a very helpful expense that allows S Corporations to use their personal residence for their business and be able to rent a space in their own homes from themselves for use of their business.
Now that you know what your business expenses are, I have a free printable that you can get. It is a list of the expenses that you can print and have handy in your office.
Do you still need some help with business expenses? I offer a 6-month course that goes over in detail all the steps of bookkeeping and how to do it completely and accurately. You can also buy the whole package and do it all at once if you would rather spend more time learning it quickly. Either way, it is a great course for those who need some extra support and learning about bookkeeping. It is called Bookkeeping Essentials. It teaches you everything you will need to know to be able to do your bookkeeping in any software. It does show some lessons in QuickBooks Online but those can all be applied to any bookkeeping software. All lessons include a workbook and a video that you can follow along and learn how to do your bookkeeping.