What Is A Tax Write-Off? 5 Most Common Write-Offs For Small Businesses

Understanding the ins and outs of tax write-offs is a massive advantage for every business owner. It helps you determine the correct amount of tax owed, and more importantly, what to write off to avoid paying any unnecessary extra money. 

This article will cover what a tax write-off is and the 5 most common tax write-offs that might benefit your business. 

Read on! 

What is a tax write-off? 

A write-off (or a tax reduction) is an expense that you can deduct from total revenue to determine the taxable income for your small business. Essentially, tax write-offs lower your taxable income, which means you will pay less tax. That’s why small business owners always try to write off as many expenses as possible.

However, write-offs must be necessary to a business’s operation and be common in the applicable industry to be qualified, according to the IRS. For example, a tax advisor can write off their business cell phone bill because taking calls helps the business operate smoothly, and it’s a common practice in the tax consulting industry. So, the cell phone expense is qualified to be deducted. 

How do small businesses write off? 

Every business, except for partnerships, needs to file an annual income tax return which will include your business write-offs. All you need to do is visit the IRS website and get the correct income tax form for your business structure. You then fill your tax write-offs in and submit the form! 

It’s also crucial to document your business spending, big or small. Your bookkeeping entries aren’t sufficient. You must keep all receipts and purchase records, whether physical or digital. This will help you stay ready if the IRS knocks at your door. 

If your piles of receipts constantly give you a headache, try Shoeboxed! Shoeboxed is a receipt scanner app that digitizes and extracts important information from your paper receipts automatically in seconds. Every single receipt will be stored and fully searchable in one secure place. Sign up for Shoeboxed to enjoy the paperless world! 

Top 5 common tax write-offs for small businesses 

The good news is most business expenses are either fully or partially deductible. Below, you’ll find a list of the top 5 write-offs commonly available that a small business owner should be aware of for the tax season.

  1. Advertising and promotion expenses

You can fully subtract the cost of advertising and promotion from your taxable income. It can be anything like:

  • Ad fees on Google or social media like Facebook, Instagram, etc.  
  • Printing costs for business cards, brochures, and flyers
  • Payment for designers to make logos, posters, etc. 
  • Software used for marketing purposes
  • Website expenses

Remember though, any expenses spent to influence legislation like lobbying or to sponsor a political campaign can’t be deducted. 

  1. Car and truck expenses 

If you use your vehicle for both business and personal reasons, you can deduct all the business-related expenses from using it.  

There are two ways to calculate your automobile expenses. You can choose whatever option gives you the most tax savings. 

  • Standard mileage rate: With this method, you just need to multiply the number of miles traveled for business by the standard rate, which is now $0.56 per mile. 
  • Actual expense method: This method entails adding up all of your vehicle’s operational costs such as gas, repairs, oil, tires, registration fees, leasing payments, and insurance charges. Multiply them by the percentage of miles you drive for business

Keep in mind that you can’t deduct the miles driven while commuting to work because they are regarded as personal commuting expenses. 

  1. Travel expenses 

A business trip eligible for traveling tax deduction has to be ordinary, necessary, and away from the entire city or area where you operate your business, regardless of where you live (aka tax home). Plus, your travel must be longer than a normal day’s work, requiring you to sleep or rest during the trip. 

The IRS approves some deductible expenses for business travel, including:

  • Travel costs to and from your destination by plane, train, bus, or car
  • Baggage and shipping 
  • Parking and toll fees
  • Cost of transportation during the business trip
  • Accommodation 
  • Dry cleaning and laundry
  • Tips
  • Meals 
  • Other similar ordinary and necessary expenses related to your business travel. (e.g., a rental fee of a hotel business center, hiring an interpreter, etc.)

Again, remember to ask for and keep all the receipts and related documents as they are the foundation for writing expenses off. 

  1. Bank fees

You may be able to deduct annual or monthly service charges, transfer fees, or overdraft fees from your bank or credit card. Also, you may be eligible to deduct transaction and merchant costs paid to third-party payment processors. For example, platforms like Stripe and PayPal fall within this category. 

Keep in mind that any fees directly tied to your personal credit cards or bank accounts aren’t deductible. That’s why it’s best to separate your business bank account from your personal one, as it’s easy to mix things up when you file a tax return and you might end up losing money. 

  1. Education costs

You can fully write off education expenses if they contribute value to your business and advance your expertise. The IRS will look into your classes or courses to decide whether they maintain or improve skills that are compulsory in your current business. If yes, they can be written off completely. 

Below are some examples of education costs: 

  • Courses to improve skills in your field
  • Seminars and webinars
  • Subscriptions to trade or professional publications in your field
  • Books 
  • Workshops 
  • Transportation expenses to and from classes

Any education costs that don’t serve your current career and business wouldn’t be qualified. 

In short, maximize your write-offs 

No one wants to pay Uncle Sam more than necessary. That’s why you really should understand tax write-offs and minimize the amount of income tax you have to pay. Don’t forget to keep good records of every transaction in case the IRS wants to audit you!. 

Get your receipts organized with Shoeboxed

Shoeboxed guarantees that all of your receipts are legibly scanned and accepted by both the Internal Revenue Service and the Canada Revenue Service. Categorized and easy to locate, Shoeboxed is your escape from the stacks of paper documents.

Get 25% off all Shoeboxed plans for a limited time, NOW!

How to Get Organized for Small Business Saturday

photo credit: girlsdayoutamy.blogspot.com

If your small business hasn’t quite figured out how to get organized during the regular shopping season, what’s to become of you on Small Business Saturday? Last year, over 100 million people patronized their local businesses and shopped small on the Saturday after Thanksgiving, and even bigger numbers are expected this year.

When everyone is beginning to emerge from their tryptophan and Black Friday-induced food/shopping comas, will your small business be ready?

Continue reading “How to Get Organized for Small Business Saturday”

Business Tax Write Offs James Bond Would Gamble On


photo credit: battleshippretension.com

According to TripAdvisor.com, Monte Carlo, the Mediterranean town in Monaco that borders both France and Italy, is the most popular travel destination in the entire world.  But Monte Carlo isn’t just for the uber-wealthy and James Bond. It’s also a top choice of middle class Americans, families and – you guessed it – business travelers. While everyone else vacationing in Monte Carlo may be throwing caution to the wind at the blackjack table, the smart small business owner will be keeping track of her business tax write offs everywhere from Larvotto Beach to Casino Square.

Monte Carlo was the first place James Bond uttered those now infamous introductory words. Y’know, last name, first name, last name. It’s also a fantastic place to put your Shoeboxed app to work, and cash in on some luxuriously legal business tax write offs. One of the most expensive parts of a Monte Carlo vacation – besides the airfare that is – is the hotel room. Unlike meals and entertainment, staying in a hotel while on a legitimate business trip is a full-blown business expense (aka 100% deductible). Now, the average price of a Monte Carlo hotel room is upwards of $400 USD, so the government’s not going to expect or require you to seek out the Motel 6 Monte Carlo. In terms of business tax write offs, the hotel room is a great place to splurge. Try the Hotel de Paris, the Monte Carlo Bay Hotel and Resort, or the Fairmont Monte Carlo. And don’t forget to scan or snap your receipts for things like printing in the hotel’s computer center, tipping the bell hop, or adding WiFi service to your room.

If you’re attending a conference at the Conference Centre Monte Carlo, your transportation to and from the conference site is 100% deductible as a business tax write off.  Scan your receipt from the driver and keep track of the mileage. After the conference, you may want to enjoy dinner with colleagues at Adagio or Lo Sfizio. Snap the receipt with your smartphone using the Shoeboxed app, and take some mental notes about who was there and what you discussed. You can organize entertainment expenses in your Shoeboxed account, but labeling a business tax write off as “dinner with associates” is not enough. Get specific about what kind of business actually went down at dinner, and any meetings or plans that were made for the future.

Where does any 007 worth his weight go after dinner in Monte Carlo? To the casino, of course! And good news – even if you’re just a casual gambler, you can deduct any losses incurred at the craps table! That’s right. The IRS allows gambling losses to be deducted, as long as losses don’t exceed your gambling winnings. In order to count gambling losses as a business tax write off, you have to get receipts for absolutely everything you spend at the table or slot machine. So have your smartphone out, tip your dealer handsomely, and get a receipt for every hand. And don’t forget – you also have to claim your winnings!