TAIKUN START TAX DEDUCTION GUIDE

This guide was created to make the lives of Taikuns easier by providing actionable information about tax deductions. The best part is many of these expenses are already coming out of your business budget, and here you will get the information to transform them into legitimate business tax deductions.

Start Up Expenses

 


Synopsis

Start Up Expenses are the costs that are incurred prior to launching your business. These costs are inclusive of the fees for obtaining a business license, forming a legal entity and other costs that are incurred when preparing to offer goods or services to the public. Start Up Expenses up to $5,000 are fully deductible. All expenses over the $5,000 mark need to be amortized over 15 years. It is also important to note that if Start Up Expenses exceed $50,000 then there will be other tax rules that will become applicable.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be paid in connection with creating or acquiring a new business.
  • The expense must be current and will benefit your business for less than one year.

What is Deductible

The following expenses are deductible:

  • Pre-launch advertising and promotions used to promote the business
  • Accounting fees incurred in forming the business
  • Legal fees incurred in forming the business
  • Fees incurred for market analysis and product analysis

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Things to remember about this deduction category is that investigative fees are not deductible if the business is not ultimately launched. However, if a business is going to be purchased and the deal does not complete, the investigative fees are deductible.

Advertising Branding & Marketing Costs

 


Synopsis

Advertising activities for a business can include a number of expenses that are incurred to draw attention to a particular product or service. These activities are designed to get the word out about a promotion, to generate a particular brand message or to market the goods of the business. Advertising can come in many forms, from promotional materials and brochures to in-kind corporate sponsorship. It is important to track this information and take the proper deductions in this category.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Business cards
  • Pamphlets, posters and promotional materials
  • Mailing list software and mailing lists
  • Branded items
  • Web design and maintenance
  • Goodwill advertising (i.e. sponsorships and donations)

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Things to remember about this deduction category is that items with a useful lifespan that is longer than the year should be categorized as business equipment, and may not be fully deductible. Also depending on the type of business, an item can be cataloged as either supplies or inventory. A good rule of thumb to use is that the item should be cataloged as inventory if it is sold as an end product to a customer.

Insurance Premiums & Fees

 


Synopsis

Many businesses have a need for insurance policies. Premiums paid for business related insurance policies can be deducted.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Premiums for business liability insurance
  • Premiums for workers compensation for employees
  • Premiums for property insurance
  • Premiums for disability insurance

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Things to remember about this deduction category is that car insurance is not deductible if the standard mileage rate for auto expenses is taken. If the home office deduction is taken, a portion of the premiums paid for homeowner or renter insurance policies can also be deducted.

Cost of Supplies

 


Synopsis

Businesses typically use supplies when providing their services to customers. The cost of these supplies can be deducted.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Materials used to develop or provide services
  • Software used to maintain business operations
  • Client refreshments such as snacks, coffee and bottled water
  • Office materials and office cleaning supplies

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Things to remember about this deduction category is that items with a useful lifespan that is longer than the year should be categorized as business equipment, and may not be fully deductible. Also depending on the type of business, an item can be cataloged as either supplies or inventory. A good rule of thumb to use is that the item should be cataloged as inventory if it is sold as an end product to a customer.

Home Office

 


Synopsis

If a home office is used for business, the space can be deducted along with associated utility expenses. There are regulations and guidelines that must be adhered to when using this deduction, so be sure that you fully understand and can abide by them before taking the deduction.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The space must be used only for business purposes, and can not be used for personal use even after business hours.
  • The space must be used on a continuing, regular basis.
  • The space must be used as a principal place for administrative tasks or work, or for meeting with customers.

What is Deductible

The following expenses are deductible:

  • Expenses associated with the home office
  • A percentage of the mortgage interest (or rent) and real estate taxes
  • Expenses for repairs and upkeep
  • Utilities including security

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

The percentage taken should be based on the ratio of square footage of the home office space to the square footage of the entire residence. The percentage does not have to be used if the expense is directly related to the home office (i.e. carpet cleaning in the home office or repair of a broken window). If the expense is directly related, then the full amount of the expense can be deducted. Deductions for the upkeep of the exterior of the home (i.e. lawn maintenance) can not be taken.

Communications

 


Synopsis

The means by which your business handles communications with customers and vendors is deductible. These expenses are monitored very closely by the IRS, so be sure that you deduct only portions of these expenses used for business if the communication method is mixed between personal and business.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses for land line phones
  • Expenses for mobile phones
  • Expenses for wireless air cards
  • Expenses for internet access

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

In some circumstances a communication expense may be for business and personal use. In this case, the percentage used for business only should be used as a deduction, not the total amount. In order to validate this percentage, communication records (especially for mobile phones) should be kept.

Clothing

 


Synopsis

Clothing items that are used for protective gear or uniforms are considered fully deductible expenses.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The clothing is essential to your business
  • The clothing is not appropriate for and can not be considered ordinary street clothing
  • The clothing is not worn outside of business

What is Deductible

The following expenses are deductible:

  • Expenses incurred for dry cleaning and care of the clothing
  • Expenses incurred for uniforms or special work clothing

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

It is important that the clothing items can not be considered appropriate for an every day outfit. Ensuring that logos or other indications of business use are on the clothing is a clear way to designate a uniform. One exception to the uniform rule is dry cleaning for items while on business travel. The cost for cleaning while on a business trip is fully deductible, as is the first laundry bill for the clothing once the trip has been completed.

Education

 


Synopsis

Seminars, online courses and other professional development learning opportunities are considered deductible expenses.

Requirements

In order to deduct these expenses,

    one of

the following requirements must be true:

  • Educational expense maintains or improves the skills needed in your present business
  • Educational expense is required by your employer
  • Educational expense is required by law to maintain your current employment or level of income

What is Deductible

The following expenses are deductible:

  • Cost of courses, including tuition, research fees and lab fees
  • Transportation expenses for local education
  • Travel expenses for non-local education

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)
  • Transcripts, agendas, brochures or speakers list

Common Tax Blunders

Trips for education may be combined with vacation, however if that is done only the cost of the course is deductible. Educational expenses incurred to achieve qualifications for a new trade or business is not deductible, therefore in most cases it is best to wait to incur these costs until after the business is started. Seminars and courses on cruise ships or outside of the United States are limited by other tax regulations.

Rent

 


Synopsis

Expenses incurred for rent payment and business equipment rental are fully deductible expenses.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses for rent of property used for business
  • Expenses for rent of equipment used for business
  • Expenses for fees related to early termination of a lease

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Rent paid in advance can only be deducted if it is used for the current tax year.

Utilities

 


Synopsis

Utilities paid for a business location are considered fully deductible expenses. Some of these utilities may fall under other categories, such as communications.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses for gas, water and electric
  • Expenses for trash pickup
  • Expenses for security services

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Expenses are fully deductible if the office location is outside of the home. If the space is a home office, a percentage must be applied and is explained in the home office section.

Licenses and Dues

 


Synopsis

Expenditures for organizational dues and professional licenses related to your business are deductible expenses.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses for business licenses
  • Expenses for franchise fees
  • Expenses for trade association dues
  • Expenses for professional licenses

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Non-permissible deductions include expenses for recreational or country club fees. Recreational clubs and group fees are also not permissible, even if there is business conducted there on a regular basis. Drivers license fees are also not permitted, unless the business requires special licensing.

Publications

 


Synopsis

Expenses for reading materials (i.e. books, magazines, newspapers or other publications) that are directly related to your business are allowed deductions.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses for books and publications related to your business
  • Expenses for subscriptions for magazines related to your field
  • Expenses for subscriptions for newspapers related to your field
  • Expenses for subscriptions for newsletters related to your field

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Expenses for publications that help to avoid legal fees and professional fees are fully deductible.

Research

 


Synopsis

Expenses related to research is deductible when related to the development or improvement of a product.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses related to research in order to remove any uncertainty regarding product development or product improvement
  • Product is tightly defined as a patent, technique, process, model, formula or something similar

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Research expenses can not include the cost of procuring a patent or process, nor does it include costs related to executing customer surveys. It is only limited to the development of products. Expenses related to investigating new business opportunities or providing a service should be discussed with a tax professional in order to determine the best approach for conducting the activities.

Legal and Professional Fees

 


Synopsis

Expenses for services rendered by a professional related to your business are fully deductible. The services can include legal, accounting or others.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Expenses for accountant fees
  • Expenses for bookkeeping fees
  • Expenses for attorney fees
  • Expenses for other professional fees

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Expenses for tax preparation can only be deducted for the business portion of the services. The personal portion is not deductible for any type of expense, including tax preparation.

Postage and Mailing

 


Synopsis

Expenses related to shipping and mailing costs are fully deductible business expenses. The deductible expenses include the costs of renting a mailbox.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Meals and Entertainment

 


Synopsis

Expenses related to the necessary costs of meals and entertainment with customers or employees are fully deductible expenses.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Travel

 


Synopsis

Expenses related to travel are fully deductible business expenses when the purpose benefits your business and the travel is overnight and away from the location of the business.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Transportation

 


Synopsis

Expenses related to transportation are fully deductible business expenses when travel is not away from the location of the business and the travel is not overnight.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Repairs and Maintenance

 


Synopsis

Expenses that are related to maintaining equipment to a normal operating condition are fully deductible as a business expense.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Repairs or maintenance that add value or usefulness to the equipment can be considered as an improvement, to which the cost must be written off over several years.

Equipment

 


Synopsis

Expenses related to your business that have a useful life of more than one year can be deducted as an equipment deduction.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Equipment expenses that have a useful life of more than one year can be considered a capital asset, which are treated under a different set of rules of deduction.

Gifts

 


Synopsis

Expenses related to gifts provided to business peers are fully deductible, however they have limitations to the amount gifted per person.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Taxes

 


Synopsis

Expenses for taxes paid related to business are fully deductible. However these expenses must be within the guidelines of the IRS guidelines for tax deductions.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Charitable Contributions

 


Synopsis

Expenses for charitable contributions can be deductible as a business expense.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Hiring Contractors or Employees

 


Synopsis

Expenses for bringing assistance to your business in the form of contractors or employees can be deductible expenses.

Requirements

In order to deduct these expenses, the following requirements must be true:

  • The expense must be necessary to develop or maintain your business, and it must be common to your profession.
  • The expense must be current and have a benefit to your business for less than one year.
  • The expense can not be a personal expense, and must be directly related to your business.
  • The expense must be reasonable in the amount spent.

What is Deductible

The following expenses are deductible:

  • Coming Soon
  • Coming Soon
  • Coming Soon
  • Coming Soon

Tax Information to Collect

The information that must be collected includes:

  • Vendor Name
  • Date of Expense
  • Amount of Expense
  • Tender Used (i.e. Cash, Credit Card, Check)

Common Tax Blunders

Empty section. Edit page to add content here.

Never Deductible

 


Synopsis

There are some areas of business expenditures that are not to be deducted from taxes, and fall into the never deductible category.

What is Not Deductible

The following expenses are not deductible:

  • Fines imposed on the business by governmental agencies
  • Kickbacks or bribes paid for services
  • Contributions made to political parties or candidates
  • Federal income taxes
  • Gift taxes
  • Estate taxes
  • The value of complimentary services rendered

 

The above information is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on your taxes, your investments, the law or any other business and professional matters that affect you and/or your business.