Top 10 Tax Deductions for Professional Business Owners

First, there are many, many more top tax deductions than just 10. In fact, many deductions are commonly missed.

Herman Wouk, a famous author once said “income tax returns are the most imaginative fiction being written today”. I say that missing income tax deductions is not an imaginative fiction because most business owners miss this easy but valuable deduction”. In fact, if you just saved $1,000 per year for 20 years at a very low 4% rate of return, you would accumulate an after tax amount of over $30,000. Just think! If you took the $1,000 per year tax savings and put that money into a deductible retirement plan and you are in the 40% tax bracket, you would accumulate another $12,000 at the end of 20 years!

With the right tax advice, $42,000 would be in your pocket!

What is so wonderful about being a business owner is that if we know and follow the rules, we can deduct a generous portion of our travel as a business deduction.

Unfortunately, I have periodontal dental gum disease. I inherited it from my mom’s side of the family. What does periodontal disease have to do with taxes? For years, I did not take care of my gums. I thought that brushing my teeth and using dental floss was all I had to do. I did not make the extra effort and use a water flosser. Now I have a lot of “4”s at my dental exams. Well, if you do not have a system of documenting your travel expenses, you could pay the price later. What we do each day today, is predictive of where we will end up tomorrow!

True, IRS does not audit a majority of tax returns but if you “deduct without documentation”, are you willing to pay the consequences of poor documentation through unnecessary stress and fear and paying out a lot of cash in taxes, interest and penalties??

What is sad is that many business owners pay unnecessary taxes because they do not know where to get help or they are focused on the urgent instead of the important.

My vote for the number two best tax deduction for business owners is knowing how to deduct travel expenses.

Start with the end in mind to reduce your taxes.

So, I am going to give you some examples of what are tax deductible with the correct tax documentation.

A. You are looking for a consultant who specializes in your kind of profession and business. The consultant does not have to work in the same city you live in. As long as you are willing to pay for the consultant, you can deduct at least a portion of your travel costs.

B. You need to document at least 4 hours each business day except for the day that you travel to the city. For example, if you fly from Phoenix to San Francisco to meet first thing with Max Tax CPA for 2 hours on Friday, Friday is considered a business day. To be able to deduct the entire cost of one way, you would have to return to Phoenix within 7 days.

C. Saturday is considered a business day because the last work day of the week was a business day. If it had been a personal day and you did not spend over 4 hours on Saturday, Saturday would also be considered a personal day.

D. Monday you meet with some prospective customers or clients or you attend a professional seminar for 4 plus hours. Monday is a business day. Therefore, Sunday was a business day too! Whether Sunday is a business day or not depends on whether Monday was a business day.

E. What if one of your relatives or friends lived in San Francisco?
You could pay them for Friday, Saturday, Sunday evenings’ lodging. Maybe they are paying for your meals out so it is a fair exchange. However, pay them out of your business account because your travel was a business trip with business purposes. You do not have to work 16 hours per day to make it a business day.

One of the predictions of being financially independent is how much you make versus how much you spend. By knowing how to reduce taxes and taking the necessary steps with your proactive professional tax reduction CPA , you are on your way to being able to outlive your money!

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009