Re-examining your records in the 11th hour could be worth your while. Here's where to start.
2011 might be over but adding or maximizing several underutilized deductions could still increase your 2011 profits. Most business owners are too busy to sit down and sort receipts but re-examining your records before April 17 could be worth your while. Here are four tax deductions you don’t want to miss:
If you were required to travel away from home for business in 2011 to see a client or go to a conference, unreimbursed travel expenses such as flight, hotel, taxis, 50% of meals, and even tips are likely deductible. If you didn’t keep receipts don’t worry, credit card statements are acceptable proof of payment to the IRS.
For 2012, at a time when plane tickets and fuel prices continue to rise, a business trip this year could be turned into a low-cost family vacation. If the trip is primarily for business, a majority of the travel as well as accommodations could be deductible.
Many of our clients are charitably inclined and giving through their businesses fulfills their philanthropic desires while allowing them to give back to their community and create goodwill with customers.
If you donated cash or merchandise or other assets (such as old office equipment) in 2011 you are entitled to a deduction equal to fair market value of the donation. If you have not received a receipt for a large donation, contact the charity and request one. It’s important to note, only gifts to qualified 501(c) (3) charitable organizations are tax deductible.
If your business operates as a partnership, a limited liability company, or an S corporation the charitable deduction passes through to the owner, to claim on an individual tax return.
One of the most important deductions that we encourage our clients to take advantage of is for retirement plan contributions. Business owners who use a SEP IRA or Traditional IRA can still make deductible contributions for 2011 until April 17, 2012. Whether you are using a form of IRA or 401k the advantages are obvious:
- Lower your taxable income for the current tax year
- Take advantage of long-term tax deferral. Ideally, you do not pay tax until the IRS forces you to withdraw a portion of the funds at age 70.5.
- Maximize your retirement savings—the earlier and the more you save the better
If you used part of your home exclusively for business, your may qualify for a home office deduction. For example, if you are a Web designer and conduct business from a home office that makes up 10% of your home, you can deduct 10% of your total home maintenance, insurance, utilities, mortgage interest, and real estate tax costs. However, if the room doubles as a recreation room for your family, not even a partial deduction can be taken.
There is nothing like a deadline to create the mind-clearing adrenaline needed to chase this type of stuff down!
Neil Teubel CFP contributed to this article
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