Title; just looking for a general discussion.
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Milage between work locations is covered at the IRS rate tax free. Since I have a home office my daily commute is covered. At 16 miles each way it’s a hair over $20/day tax free.
Buying employees or clients lunch / dinner.
I know there are differences in the write offs and no alcohol but money I don’t mind spending.
Construction machinery.
?? Why would this ever be considered a be personal expense?
Apparently, Vape Tax if you live in Canada. I’m not sure how yet, though.
I knew of a customer who wrote off all expenses from his dog bec his accountant labeled the dog a guard dog bec they bark when there are intruders, most likely.
Did you know you can write off the interest of a loan if you’re using it for investing?
Did you know you can write off the interest of a loan if you’re using it for investing?
…huh. Does that mean that person A can give a loan to person B who invests it, and charge 1000% interest which A pays (but then writes off so it’s no cost to them), and vice versa? So both A and B are getting income (from the interest being charged) and it’s coming out of each other’s taxes?
You can only write off the expense. So the money that goes out of your account. So when you say vice versa, it cancels out to no benefit for A or B. A has money coming in as revenue but money going out as an expense so essentially nothing happened but a waste of energy.
The revenue and expense aren’t for the same thing, though? How would you be able to write anything off if you ever had any revenue at all from any source?
(Or, alternatively, have the interest payments from A to B and B to A be made in alternating tax years.)
It doesn’t matter the source of revenue or the category of expense. They aren’t balanced against each other in any way at tax time, they are all just added up: money out versus money in.
Tax write offs are just expenses the business incurred. Say I make $100 in revenue but I had to buy some paper and pencils that year for $20. I’d have $20 in business expenses to write off against my total revenue for the tax year. So I’d have $80 in taxable revenue for that tax year after the business expense deduction (write off).
Even if you alternative tax years you’re just kicking the can down the road. Businesses actually do this quite frequently. They try to make as many deductions as they can and will even go negative sometimes and all those loses will carry forward into future tax years. Amazon did this for years and years by reinvesting into the business and accumulated massive tax deductions so this is one way “corporations don’t pay any taxes.” Well they took huge losses for years and years and are just catching back up on those losses as deductions in current yearss, they’re not “not paying taxes,” they just had no profit to tax even though they had revenue.
It doesn’t matter the source of revenue or the category of expense. They aren’t balanced against each other in any way at tax time, they are all just added up: money out versus money in.
Hmm. Perhaps there’s something I’m not getting. Is it only loans from pre-approved sources (like banks) which can have their interest written off, or loans from any source (like Jimmy the Nose who lives in the alley)?
The interest paid against a loan would be categorized as an interest expenses on your P&L. That would be captured on your tax filing and would reduce your taxable income by the amount of interest paid out in that tax year. It doesn’t matter who the loan was from for that to happen. You can make a loan from yourself to the business and charge the business a reasonable interest rate or the loan could be from anyone or business.
If you get a loan from a bank and the interest part of your payments can be written off if you invest money from loan into investments.
Have your kids actually work. Pay your kids. Roth IRA. Doing it now for 15 year. They are lucky.
Interest on car loans. We have three vans and two trucks that we finance and every year that’s about $8k in interest
Genuine question—why is this a surprise? Interest is included in the payment, right? And the vehicles are owned by or used exclusively by the business? Why would the interest on the loans convert to a personal expense?
My vehicles have always been deducted in full when purchased even if financed so the car payments aren’t an expense so the thought of the interest didn’t cross my mind until my cpa mentioned it
Home office, clothing for events, shoes for events, sporting events, food for employees once a month.
Commuting
Commuting is not tax deductible. The IRS does specifically ask for how many miles you spent commuting, but you get no deduction for it only business related miles.
Commuting is business related miles. I have a customer wanting to meet on site, that’s business related
That’s not commuting. Commuting is traveling to and from work and home.
One item people are prone to missing is that even if you use the per mile rate for vehicle expenses, you can still deduct a prorated portion of your car loan interest.
Otherwise it really depends on your line of work, the same things are not deductible for all types of business. Farming has a lot of treatments that are different than renting out properties, or running a restaurant, or offering child care in your home.
That’s interesting about the vehicle interest. I thought the mileage rate was supposed to cover EVERYTHING.
Yes, that’s why it often gets missed. To the IRS it is debt costs, not vehicle expenses. So it’s still deductible.
Ohhhhhhh that makes total sense.
Computers, phones, paper towels, cell phone bill, tools, continuing education.
Not to be a spoil sport, but discussions like these always befuddle me.
If it is a business expense, it is deductible. If it is not a business expense it is not. That is just how income, expenses, and taxes work.
There is no magic, no loop holes, no surprises. Most likely if you think there is magic, loop holes, and surprises, you are doing something fraudulent.
I also don’t understand this. Did you spend the money to in the interests of generating revenue for your business? Deduct it. Did you spend the money for any other reason? Don’t deduct it. Was it a mix of both? Deduct some of it.
For an “S” corp yes. It’s this simple. Other corporations it gets a little more complicated.
My CPA neighbor writes off his diesel pusher RV as an office. He argues your case in court against the IRS. So I guess he knows what he’s doing.
Thank you, I appreciate that you understood the spirit of the question!
Also, I’m sure there’s a Breaking Bad joke in there somewhere.