January is winding down meaning that tax season is officially upon us. Gone are the carefree days of the holiday season and now the inevitability of taxes is looming ahead.
Don’t lose heart though! Paying taxes is a requirement but paying too much in taxes is not. 2011 presents new opportunities to excel at preparing your taxes by using the allowable deductions to your advantage.
Here are five of the most commonly missed tax deductions. Learn them. Love them. Use them on your tax return this year.
1. Healthcare Tax Credit. If you own a small business that pays for at least half of its employees’ healthcare coverage, you’re eligible for a tax credit of up to 35% of what you spend on the health insurance premiums. The credit is maximized for businesses that have 10 or fewer employees that average $25,000 or less in annual wages so smaller businesses are favoured here. If you have a qualifying business (based on number of employees and average annual wages) but aren’t paying for at least half of your employees’ healthcare coverage, now is the time to consider changing your practices. The maximum available credit will be raised to 50 % in 2014!
2. Health Insurance Deduction for the Self-Employed. Maybe you’re self-employed and paying for your own health insurance? In past years, the money you spent on health insurance premiums has only been eligible as a deduction on your income tax, not your self-employment tax. This year, however, it’s available as a deduction on both taxes. Don’t forget to include it twice when you prepare your returns.
3. Depreciation on Your Business Car or Truck. If you bought a new truck or car for your business last year, this one’s for you. Depreciation amounts on new passenger vehicles purchased to use in a business are significantly higher this year than last, building on top of the usual first-year deduction that is allowed. Gas and maintenance on this vehicle (and others already purchased for your business) are also deductible for any transportation you do for the business. Say you own a furniture store and have a truck you use exclusively for delivering furniture, 100% of gas and maintenance will be deductible, including any money you pay for parking and toll roads.
4. Out of Town Business Travel Costs. Almost any travel you do for business is deductible on your taxes for at least some percentage. This includes business meals, travel costs (think baggage fees!), and hotel rooms for the duration of your trip. It’s important to keep the receipts from your travels and also keep track of where you’ve been and what you did while there. A cab here and there while out of town for business can add up quickly on your tax return.
5. Home Office Deduction. Do you work out of a home office? If so, there are many deductions you may be missing on your tax returns. Deductions for qualifying newly acquired equipment and computer software are easy enough but it’s important to know that you can take deductions for many fees charged to your business account including ATM fees, credit card fees, and bank charges. You can even deduct for the space you use in your home and for the percentage of internet and phone that you use for your business! While calculating these percentages may seem difficult in the beginning, it can be a great benefit to you in the end when it comes time to pay your tax bill.
Many of these deductions may seem easy enough to master now but when combined with the other myriad of deductions, credits, and exemptions that must be remembered when filling out a tax return, they frequently fall by the wayside. Don’t let this happen to you! Stay tuned for five more deductions next week!
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