About Self-Employed Federal Income Tax Deductions

Video Transcript

"Hi, today we're here to talk about business deductions for the self-employed. There are a number of deductions available to the self-employed individual. There are business expenses that are, some of them are expenses that are related to cost of goods sold, and those would be rolled into your things like freight and inventory, that sort of thing. You'll also have expenses that are typically larger expenses that would be called capitalized expenses. In your expenses the IRS says that they have to be common and reasonable, and all of these expenses are subject to review so you want to make sure that you're you're takin' a good look at where they should go. Whether they should be capitalized or whether they should be expenses as part of your cost of goods. Things such as buildings, that sort of thing, are typically capitalized, equipment. Things like advertising or office supplies are typically expensed as you use em'. Many times an individual working out of their home can use expenses such as office space, part of your utilities. There are a number of of related items that can be expensed as part of the business. You have to document it well, and things like your office space has to be exclusively used for business. You can't say well, I'm using this room for business so I'm going to write it off even though it's also a TV room, or a a bonus room, or whatever. It it pretty much needs to be exclusive. The other big one is typically a business use of a car. There are a couple ways of doing that. You can either, if it's exclusively used for the business you can take all of your actual expenses versus, a lot, most people will take the mileage deduction and to do that you need to keep a good track of what your mileage is, how much of it is personal, how much of it is business. If it is business miles you need to document what it was for and where you went. And you can keep a book, a small, they sell em' at the office supply stores, but they're mileage records that you can keep with you and document where your miles have gone. Again, I would encourage you to look at the IRS documentation on what types of things are acceptable, and what the guidelines are because it can get a little confusing, but stay with it."