Tax day is creeping up on us once again. And if you are like most photography business owners, filling out tax forms are anything but a fun time. Whether you do it yourself, or hire someone else to do it for you, nothing can make the experience a little more bearable is seeing the word “refund” instead of finding out how much more you owe.
With thousands of pages of code and a plethora of changes that occur every year, its easy to miss things that could impact your bottom line. Check out these commonly overlooked deductions to see if you qualify for more this year.
1. One of the most overlooked credits is the American Opportunity Credit, which has been extended through 2012. This credit allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each student. Whether you or a child is currently in college, this credit is nonrefundable, which means you could get back more in a refund than you paid in.
2. Have you donated anything to charity this year? While you’ve probably cleaned out your closets a time or two, don’t forget about the things you’ve donated for your business as well. A donated portrait session still has value.
3. Mileage can be a huge bonus to your bottom line. In many cases, you probably use your car for personal and business. Everything business related can be deducted. Also include volunteer mileage as you are driving to and from charity functions. While you do have the option for reporting actual expenses or taking the mileage credit, the mileage credit is usually the easiest way. Keep a log handy in your car and record everything you do for business.
4. Just because you office out of your home doesn’t mean you can’t use your office as a deduction. Many business owners put off including their home office expenses because they aren’t sure what can be included and they would rather be on the safe side. If you are entitled to it, you should claim it. The important thing is to keep records of everything and separate your personal and office aspects of your home.
5. Do you use your cell phone, mobile devices and computers for business? Include the purchase amounts and any monthly fees in the deduction process. The same applies to your Internet service.
6. Newspapers, magazines and trade journals are considered to be training materials for your business, and therefore considered to be deductions. Sign up for subscriptions that will help you improve your business process and claim them on your taxes.
7. If you’ve made the split from holding a full time job and are now working for yourself, you’ve already encountered the pains of finding your own health insurance. While working for a company has its advantages – they may pay part of your monthly insurance premium – working for yourself has its advantages too. In many cases you can deduct the cost of health insurance for yourself and your family. In other words you can create your own health benefits program by supplementing it with a tax deduction, writing off money spent on the premium.
8. Meals and entertainment can be used at the 50 percent rate. However, keep in mind this is the one are prime for abuse, which means it’s the most frequent red flag area that causes potential audits. Keep receipts for anything that falls in this area.
9. Travel on a regular basis for weddings, events or corporate jobs? To be considered business related you must have specific business purposes planned before you leave home, and you must conduct business while you are on location. Keep logs and receipts of everything you do – meals, auto rental, subway expense, toll road fees, etc. Business travel is 100 percent deductible, minus your meal and entertainment expense.
10. Not in college but still attending training throughout the year? Education is considered to be a business expense, and therefore can be written off accordingly. Track everything related to your education, including travel, mileage, meals and the cost of the class itself.
11. As your photography business thrives, you’ll begin to focus on investing for the future and hiring others to plan and prepare your taxes. Fees for planning, lawyers, accountants and other tax professionals are deductible. Fees paid to your broker and IRA funds, subscriptions to investment magazines, long distance phone calls to your broker or advisers, even mileage are all considered deductible expenses.
12. The retirement tax credit gives you two great benefits. First, any contributions to your retirement account aren’t taxed as of now. Second, you get a credit on the first $2,000 you invest, resulting in a reduction on your taxes as well.
While this isn’t a complete list of tax deductions, nor is it considered to be legal or tax advice (yep, have to add that in here), this list is here to remind you of things you may qualify for during your 2011 tax reporting process. Talk with your adviser or look for every advantage possible as you finish up your 2011 business year.