7 Tricky Business Tax Deductions To Apply With Caution

Tax season is a stressful time for every taxpayer. For business owners, this is the time to get all your documentation right and apply the right tax deduction to reduce your tax bill. But this can be tricky as some deductions are more difficult to apply than others. Not saying that these deductions are not legitimate, but these can be complicated to calculate and might trigger an audit.

To guarantee a smoother tax filing season, host your tax preparation software, like Drake on the cloud. Having a single platform to collaborate with all your authorized team members working on the finances is a great way to streamline your tax filing process. Make sure you have all the business records you need.

Look out for these 7 tricky business deductions.

1. Home Business Space

This applies to those running a business or part of their business operation from home. The IRS just wants to clarify that the defined space is being used for business purposes only. Also, be careful with calculations and deduct the amount only for the space used for business. The IRS can perform a manual check, so make sure there is nothing personal in that area.

2. Employee Gifts and Rewards

All types of gifts or appreciation awards given to employees should be deductible as it certainly is an allowable expense. However, this comes with a condition. The gifts must be small, and some of these are taxable to the employees. So think carefully before buying something for your employees. Record all your expenses in one place with Drake tax software hosting.

3. Business Travel

There are several factors to be taken into consideration while filing for this type of deduction. There are restrictions in amount and more. The IRS defines business travel as “substantially longer than an ordinary day’s work” meaning it requires you to sleep or rest away from home. There are rules for in-the-country and out-of-country travel deductions. Consult your tax expert to avoid any miscalculations. Use Drake tax software hosting to collaborate with your tax advisor without limitations on geographical location.

4. Meals and Entertainment

From this year onwards with the new Tax Cuts and Jobs Act in implementation, business meals are not deductible. This means all sporting events or concerts that are taken for business no longer come under deductible expenses. Although meals are still limited to 50% allowable expenses.

5. Charity Donations

Companies can always deduct their donations to charities, but be sure that the charities must be in the IRS list of qualified charitable institutions. Ask your tax advisor for more types of charity deductions. For a streamlined tax filing process, use Drake cloud hosting.

6. Business Assets

This can be called the most complicated deduction as the rules and specifics keep changing from every year. Detailing that on your tax file will be tricky, which you need to plan the filing with your tax advisor. Discuss this deeply and figure out a strategy that works the best for you.

7. Computer Purchase

Computers, tablets and peripheral devices are now legitimate business expenses. They do not come under depreciation restrictions unless their cost is more than $2,500. Thus, the full cost of the device can be deducted from the tax bill for the year it was purchased and used. Make sure the device is used for business more than 50% of the time.

This article is purely written for information and not intended for legal advice. Every business situation is different, thus, discuss all possible options with your tax professional.