How will the pandemic affect your ability to take tax write-offs?
The pandemic has changed the economy, shuttered businesses, and sent many people home to work remotely. What some may not have reckoned with yet are the ways that it may affect our tax write-offs. Here are some things to think about as you plan out the rest of your year.
Home Office Tax Deduction
If you are hoping to get this deduction, but you work for a large company, it is highly likely that you won’t be able to claim it. On the other hand, if you are an entrepreneur or small business owner, your home office is definitely going to be something to claim on your taxes. You need to familiarize yourself with the rules to make sure you can prove that you deserve the deduction.
Office Supplies and Expenses
Like the home office deduction, this type of deduction only applies to self-employed individuals and small business entrepreneurs. You should definitely ask your accountant if you can deduct for your new laptop, software, phone or printer, but working remotely does not usually qualify you for these deductions. When you outsource bookkeeping, you can ask them to calculate what you may have spent on these items.
Perhaps you usually use your car for travel, sales, and client meetings. Suddenly you are doing everything at home. You may not have much to deduct in this category. On the other hand, this may be the perfect opportunity to lease a new car for business purposes because you can deduct that expense. A quick talk with your accountant should help you decide. Currently car dealerships have seen their sales slump and their trade-ins dwindle down. They will appreciate your business, and that may mean a good deal.
Many businesses have given up their storefront and gone home. While working from your home lets you earn that home office tax deduction, you will lose that healthy tax deduction for your business space rental. Furthermore, the loss of rental business property can lead to the loss of the deductions for its upkeep. You should be planning with your accountant to see how this will hurt your overall tax bill. There may be steps you can take now to be eligible for other deductions. For instance, if you are renting a storage unit, this may help reduce your tax burden.
Advertising and Marketing
Many people have turned to free social media for marketing. That’s great, but you won’t have anything to deduct in this category like you may have last year. This may prompt you to take the leap and try out Google ads or social media ads. That should be deductible. Check with your accountant to be sure you qualify.
Legal and Professional Fees
Your small business may have struggled this year. The good thing is that you can deduct the fees for your attorney and accountant. That takes the sting out of seeking professional advice.
Small businesses and self-employed individuals should pay close attention to how their tax deduction opportunities may have changed due to the pandemic. A bit of planning may keep the changes from turning into a burden.