by Rainier Beach Merchants Association (Special to the South Seattle Emerald)
Are charitable donations deductible through your business? What counts as a “working” meal? What is one of the biggest deductions that is missed by small business people?
Business tax expert Ingrid Clair of Clear Associates joined us for our last Rainier Beach Merchants Association with answers to these small business tax mysteries and more. Below are some takeaways from this meeting as well as some additional tips from our member Roderick Givens owner of RainierView Advisors, a Rainier Beach financial planning firm.
To start with the questions above, straight charitable cash or goods donations are only deductible on personal expenses, and not as a business deduction. However, if goods donations are categorized as a “marketing expense” rather than a donation, these goods are deductible as a business expense.
“Working meals” are deducted at 50% of their value. These include any meal that is designated as a meeting, and where business is discussed. For example, our Rainier Beach Merchants meeting with Clear Associates is deductible because business tax tools were discussed. However, it is critical to keep excellent records of with whom you met and what business was discussed. Some great news – that holiday party is 100% deductible! More info on meals deductions from Entrepreneur Magazine here.
What is one to the most commonly missed or under-calculated deductions? Mileage! Get an ap or keep a mileage log in your car to track every mile you drive for work. The 2015 deduction rate is 57.5 cents per mile! Unfortunately, this will be going down to 54 cents per mile for 2016, but still absolutely worth tracking.
Roderick Givens of RainierView Advisors points out, “One of the biggest opportunities missed for small business owners is expensing mileage. We all know its there but who wants to calculate miles or keep a mileage log in the car? Despite our hectic life we typically do things in patterns. I, for example, drive to Bothell, downtown Seattle, Federal Way, Bellevue, and Portland almost every month. Even within the Rainier Valley, its 3.7 miles to Tutta Bella. Or Fed Ex Kinkos in Tukwila is 5.7 miles and those miles add up,” he says. “Therefore, I create a spreadsheet that lists distances to the top ten locations I may drive for business purposes from my office. At the end of the week I can just document the date, destination, purpose, and mileage which is already calculated. Having a reasonably accurate calendar makes exercise 5 minutes tops.”
More info on mileage from MileiQ here.
Jennifer Kantzer, owner of Balanced Massage was happy to learn these things, as well as a couple of additional deductions that work for her. “I was happy to learn that garden maintenance is deductible as a service,” she said, “because I have clients coming to my home office for treatments.” As a licensed massage practitioner, it is important for her yard to look healthy and well maintained to reflect on her work and environment. It was also important for her to learn that the maximum that a business can deduct on a gift for a client is $25.
One other important piece of advice from Clear Associates, is to secure accounting software that works for you. Utilizing an accounting system throughout the year will significantly help ease pain during tax time. Clair’s top picks are Quickbooks Online, and Xero for ease of use, automated banking feeds, and security. Check out Business News Daily picks here.
Now that we’ve given you some things to check on before filing your 2015 taxes, it’s time to set yourself up with some thoughts for 2016. Roderick Givens of RainierView Advisors shares the following with us:
As financial planners work with their clients to minimize taxes, here are a couple takeaways that can help you reduce taxes with your business in the 2016 tax year.
1. Every year, businesses buy equipment like computers, office furniture, and software. A business can take advantage of section 179 of the IRC to expense the cost (up to $500,000) in the current year. This reduces taxable income that year but the equipment is very likely to be useful beyond one year. It’s like paying for an all you can drink cup at McDonalds and being allowed to use the same cup when you come back the next week. Eventually your cup will be gross, lost, or you stop going to Mickey D’s but the time you can reusing it sure is nice.
2. And in case you were wondering, investment advisory fees in IRC section 212 (the fee paid to firms like RainierView Advisors) can be a deductible expense given investment income and floors set by adjusted gross income.
Please note: RainierView Advisors is not a CPA firm nor prepares taxes. For more information please consult a tax professional.
Feature Image: CC License photo courtesy of Images Money/Flickr