This week, we continue our series by discussing other business expenses that you might be overlooking.
In the “old days” the IRS put a very burdensome requirement on the business portion of many items that are hard to separate out the business verses personal use on.
One I bet you have nearby or even on your person right now is your cell phone. Can you imagine how difficult life would be without a cell phone? If you’re like me, you’ve canceled your home landline phone. Why pay for a phone number that you hardly ever use?
Now the IRS says basically, if you have a legitimate business reason for having a cell phone, they don’t care if you also use it for personal purposes, 100% of the cost of the cell phone and the service is deductible. Here is one simple mistake that many folks make. When you purchase a cell phone, the purchase price is usually bundled into the monthly service fee. You should separate out the actual purchase price of the phone and deduct it all at once in the year you purchased it. (Then make sure you don’t deduct the payment portion of the monthly fee.)
What about internet services? Basically, the same as cell phones. If you must have internet for your business (who doesn’t?) then the IRS doesn’t expect you to try to separate out any personal use. The entire cost of internet service is deductible for business purposes. Once again, if your internet service includes the purchase of a modem or other receiving device, you could separate that out and deduct 100% of the purchase price up front. As with the cell phone, you want to separate out any monthly fee for the purchase of the equipment and not deduct that twice.
Website development costs, and website hosting fees are obviously deductible. Many folks forget this for some reason. So, make sure you capture that.
I get asked a lot, “Kelly, what about those cute soccer kids who come by my business looking for me to sponsor them and get my business name put on their shirts. How do I deduct any of that?”
Simple rule of thumb. Did you seek them out and offer to sponsor their team, then it probably is charity and deductible on your Itemized Deductions Schedule A. If they found you and, blinked up at you with those innocent looking eyes as they pleaded their case, then that is NOT charity, but advertising or promotion. A legitimate business expense.
When trying to decide if you get to deduct something for business purposes or not. Ask yourself, “Do I need and/or use this in my business?” If the answer is yes, then you should be able to deduct it. Warning! “Toys” such as motorcycles, RVs, boats, airplanes, side-by-sides, etc. are not something you want to normally attempt as a business expense deduction. The IRS is on the watch for those, and you increase your chance of be audited if you try to deduct them.
Did you hear? Prov 18:15 says, “An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.
