You Can Still Deduct This from 2018, But Not That

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You Can Still Deduct This from 2018, But Not That

Tax Law Changes 2018

Tax Law Changes 20182019 will ring in the New Year with significant changes for tax payers. Whether you get a W-2 or 1099-Misc there are some things you should be aware of as April 15th approaches and you begin to prepare your 2018 tax return.

The most important and timely information first. Start your preparations NOW! We know, we know, you hear this every year, but this year we mean it! The government shutdown, if prolonged, could cause major delays in getting your tax return. If you’re expecting a refund that’s no fun. So file your return as early as possible, meaning now if you can.

If you’re self-employed or have a small business the Tax Cuts and Jobs Act passed in 2017 still allows for most of the business tax deductions you’ve been used to claiming in the past.

Here’s a list of the top 10:

  1. Mileage Deduction – If you’re going from your office to your client’s office, keep a log and take your mileage off your taxes. You can also deduct transit expenses for travel to a client. At 54.5 cents per mile, it can add up fast.
  2. Home Office Deduction – There’s no reason why you can’t deduct that portion of the apartment and/or home expenses, based on square footage that you use for a home office. Just remember, to take the deduction your home office must be of “regular and exclusive use” and your principle place of business.
  3. Equipment Purchases – The cost of any electronics you use in your business can be written off on your taxes. If a device has mixed personal and business use, the deduction is proportional. If 30% of your phone usage is for business calls and emails, you can deduct 30% of the cost of the phone and your monthly bill.
  4. Insurance – This is one most of us don’t think about but is pretty important. Generally, you want to have some kind of professional liability insurance. You may want to have cybersecurity insurance. Eventually you want to have disability insurance. The premiums for these policies are deductible. Your health insurance premiums might also be deductible. See this article for more details.
  5. Retirement Savings – If you work as an independent contractor an IRA, SEP IRA, or solo 401(k), will allow you to defer taxes on that income until you retire. The amount you contribute comes off your taxable income.
  6. Business Travel – Most people that start out in business, especially in the gig type of economy, are going to be looking to meet people. Whether you go across town to a networking event or across the country to a professional conference, your travel expenses can be deductible.
  7. Meals and Entertainment – When you meet a client, if you have a meeting over coffee or lunch or a fancy dinner, you can write off the cost of half of that meal. The tax rules have changed, however, so any non-meal entertainment expenses are no longer deductible. If you take a client to a concert, you can no longer deduct that cost.
  8. Training and Subscriptions – Anything to make you better and more knowledgeable in what you do now is deductible. The caveat here is training must be something that enhances your ability in your current career but doesn’t get you ready for a different career. Subscriptions to professional magazines and apps and software that you use in your business are also deductible business expenses.
  9. Client Gifts – Gifts to your clients are deductible, up to a point. If you send a year-end gift basket to an individual client, you can deduct up to $25 off the cost. If the gift is for the company as a whole (a coffee table book, for example), the limit is higher.
  10. Credit Card Interest – If you charge business expenses on a credit card the portion of interest that relates to business expenditures can be deductible. There is a limit however to the deductibility of this interest, but the limit is high enough that it won’t apply to most independent contractors.

There are also some new “don’ts” when it comes to deductions for the 2018 tax year. They’ll mainly effect your personal deductions rather than your business.

  • Miscellaneous Employee Expenses –  These are eliminated this year. In the past, you may have had some non-reimbursed expenses, like mileage or union dues or some of those types of expenses that could be deducted as an itemized deduction in the past. Those are gone.
  • Property, Local, and State Tax Deductions – In the past, if you’ve had multiple residences or high property taxes or even high state income tax you could deduct it from your federal income taxes. This year there is a limit on the amount you can deduct. The limit is $10,000.
  • Dependent Deduction – This deduction goes away too, but don’t despair! It’s made up by a new dependent tax credit which allows for $2000 per child and $300 per qualified non-child dependent.

When it comes to taxes one axiom remains true.

The more things change, the more they stay the same.

This content was curated from the following sources: Business Insider – NewsChannel20.com – Smart Asset – TurboTax

 

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