Know your tax deductions

If you are like many people, "tax deductions" may be this mythical "thing" that means if you spend money you can deduct the money on your tax return.  In theory that is true, but it goes a bit deeper than that. Not all expenses are deductible and some are only partially deductible.

So what are your tax-deductible items?  It's actually a simple list, and if you are doing your own bookkeeping it's important to understand that list.

Look at your last business tax return. If you are self-employed you most likely file a Schedule C - smack in the middle of that form is a list of deductions.  When you know those deductions it helps simplify future processes.  The deductions can change or adjust a bit from year to year - for example, meals and entertainment deductions have recently changed.  If you paid for coffee with a client one year it may not be the same deduction, in part or in full, the next year.

In the very early days, I used to really break down my expenses - I thought it would give me some data that would be helpful. Hint: it didn't, not really. Don't spend time "organizing" your receipts and bookkeeping in excess of what you really need.  Your bookkeeping categories can match your tax deductions, and then if a few need to be expanded that's okay too.  The more you work with it the more you will learn what you need and what works best for you and your taxes.

Need help setting up your books or want to know more?  We do that!