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What are some things that you write off when tax time comes around for you t-shirt business?

This question came to mind when I wondered how would one write off electric use for the heat press, printer, computer, etc. I mean how do you calculate that when it is also wrapped up in your personal use? I guess this also includes your phone service if you do not have a 1-800 number.

When I first started this business I had no space so I had my balcony enclosed specifically to use for my office, cost me almost $4000 but I also use it to keep my children from taking a flying leap off the 9th floor, is that something I could still write off would Uncle Sam accept that? :confused:
 

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Re: Tax Write off's

You should talk to a qualified tax preparer for these types of questions but generally you could do the following.

Take the amount of space used exclusively for your business and divide by the total square footage to get a percent. So if you used 200 square feel of a 2000 square foot house then you are looking at 10%. All utilities, rent, insurance and maintenance costs are at 10%. You could make a case for the increased electric costs and take more than 10% but it needs to be documented. If the enclosure is for business then you could take the entire amount. Because this is for a business use, if you own the house you will not get the exclusion from taxes when you sell on the percent that was for business. Again, you need a tax professional for this.

Your primary residential phone line is not deductible at all. If you had a second line, that could be. All other business related activities are expenses to the business and come off 'above the line' or before the number hits your personal 1040 as an agi number.

Hope this helps.
 

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Re: Tax Write off's

Hi Guys,

Basically Binkl nailed it on the head. If you have items that you use on a personal and business basis, you will have to allocate it. The easieest way of dealing with this is to set things aside just for business. It is always best to talk to a tax professional as Binkl mentioned.

Here are some other things (please check the numbers by yourself, and use this as a guideline to do your own research or ask a CPA):

Meals and entertainment: 50% of the actual cost may be written off as a business expense as long as they had something to do with your business.

Car: This gets prettty complicated as only certain trips are deductible. Of course if you have a seperate car exclusively used for business you can write off a lot of expenses related to it, much like you can write off expenses for a home office. In a nutshell if you drive to your usual place of business it is not deductible. However, if you go from that place of business to another worksite it is deductible. In general you can deduct the standard rate (it changes) or the actual mileage.

Travel Expenses: Basically you can deduct "ordinary and necessary expenses" used in traveling for a Business Purpose. For example if you take a business trip that is 7 days, and 3 of them you use to go sightseeing, only the expenses for 4 of those days are deductible

Here is some supporting documentation for everything I said (it expands a lot more than my relatively simplified one, but it is still relatively short):
http://www.irs.gov/businesses/small/article/0,,id=105708,00.html

That's just a few small but often overlooked ones.

Hope it helped,
Sing
 

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Re: Tax Write off's

In addition to what's already posted above.

Please advise your tax consultant to determine the exact procedure for these items as some expenses may require different depreciation schedule.

Education Expense (Seminars, workshop, things that would improve your skills for your current job)

  • Software
  • Advertising and Promotions (Includes business cards)
  • Office Supplies
  • New Equipment
  • Travel Expenses (meetings with suppliers and clients)
  • Bad Debt (If someone stiffs you on an order) - Becareful not to inflate this number to create a large bad debt. Red Flag for an audit.
  • Interest Expense from credit cards and bank loan (For your business only. Not for personal loans)
  • Legal and Professional Fees (Tax professional, lawyers, consultants, etc.)
  • Your website hosting and design fees
  • Operating Utilities
These are just some guidelines. Please look more into these as your situation may vary.
 

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Re: Tax Write off's

Cestlavie said:
Meals and entertainment: 50% of the actual cost may be written off as a business expense as long as they had something to do with your business.
Good to know; I did not know this one was a special case (with the 50% cap).


You can generally deduct "most things" that can be considered business-related, but if you really want to be sure you're going to probably have to talk to a professional.
 

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Re: Tax Write off's

Tax write-offs is really a bad term to use. Business expenses is more appropriate.

The are circumstances where food is 100% deductable. Also, if you have a home office then that is your first work site and all traveling after that in your local area is a business expense. Home office qualifications have been expanded quite a bit in recent years but you still need exclusive use for the office to qualify. If you store samples of your products then that qualifies. If you have a separate structure, that also qualifies.
 

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One more thing no one has mentioned. Keeping good records is critical. Not only for your accountant but in the event of an audit, the more documentation you have the less likely you will fail an audit or open the doors to more scrutiny. How likely are you for an audit? Not very. But your accountant charges by the hour. The more work to do, the higher the price and the more likely an error will occur.

We keep a mileage log in each car and record miles driven to each location. If we go to the same place all the time then we measure it once and use that amount all the time.

For meal expenses and entertainment (M&E) you need the actual receipt with the items on it, not just the credit card stub, who was there (names), and business purpose.

If you have a loss you have to show that.

If you have out of State sales, your sales tax return must show gross sales less out of State sales. These numbers need to match your income tax return or at least be close.

If you use a vehicle more that 50% you can depreciate it as a business expense for the % used. If you purchase a vehicle (new or used) you can use section 179 to accelerate depreciation the first year but to take operating expenses you need actuals, not the 4x/cents a mile as an alternate.

If you claim 100% use for a vehicle you will need a 2nd vehicle. After all, you must have some personal miles.

If you have a home office, it must be for exclusive use. You cannot use a bedroom that you also sleep in, dining room table, etc. You do not need a partition like a wall or door. So you can allocate part of a room, measure the square feet and use that as long as it is used only for your business. We use a room in our house but don't include the closet in the space since it isn't used for business purposes.
 

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Re: Tax Write off's

Good to know; I did not know this one was a special case (with the 50% cap).


You can generally deduct "most things" that can be considered business-related, but if you really want to be sure you're going to probably have to talk to a professional.

Just curious to know What constitutes as business entertainment?
 

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Re: Tax Write off's

Hi There, i have a quick question. If i were to register a trademark for my brand and logo would this constitute as a business expense? Just want to make sure, as i understand it, anything that is used towards your business is a business write off.

So i would assume this fits the bill so to speak.
 
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