Business Deductions Explained

EXPLANATION OF BUSINESS DEDUCTIONS

Any type of meal goes into the same classification and is only 50% deductible.  The only way that it would be 100% deductible is if the employee were out of town overnight for business and turned in an expense reimbursement report, then it is 100% deductible.  The other area that would be 100% for food is if you are holding an event and it is open to the public that anyone can attend.  An example off this would be that a real estate brokers holds an open house.  They put signs out to attract people off the street to come into the open house and offer food and beverage.

Home office deduction, as an employee of your Employer or your own corporation it is NOT not deductible.  This is considered an employee business expense and since the new Trump tax law change in December 2017 EBE is no longer deductible.  The work around for corporations is that you charge your corporation a monthly rent.  You or your employer must write a check every month for office rent.  For example the rent is $500 per month.  At the end of the year a 1099 is issued by the corporation as rental income to you personally.  Then you claim it as rental income on schedule of your return.  The next step then is to compute the business use of your home.  What is the square footage of the office space in the home (by the way it has to be exclusive use, no personal use.  I get the question that I use my dining room table for business can I deduct that.  And the answer is answered with a question do you ever use the dining room for Thanksgiving, Christmas etc.???  If the answer is yes then it is not exclusive use and is NOT deductible.  Once you have determined the square footage of the home office area then you divide that by the total square footage of the entire home.  Example office 200 sq ft total home 4,000 sq ft equals 5%.  Then once the percentage is established then you go through and add up all the expenses associated with the home and then take 5%.  Expenses include mortgage interest, property taxes, insurance, utilities, gardner, pool man, pest control, maid service etc.

I am asked all the time what can I deduct for Auto expense as a business deduction.  Can I write off actual expenses?  The answer is yes BUT then we have to ask the question is the vehicle 100% business use?  In most cases this is not the case.  There maybe 75% business and 25% personal use.  In order to determine this you must keep a daily log of business miles and then at the end of the year take to total business miles and divide it into the total miles of the vehicle for the year.  That determines the business percentage and then you apply that percentage against all the operating expenses of the vehicle (you must maintain receipts for all of the expenses).  This includes gas, maintenance, insurance, payments, etc., and that then is your deduction amount.  The other option is that you can take the business miles driven times the Government Standard rate (for 2024 is .67 cents per mile) and use that as a deduction.  This amount is considered to include all the items above plus depreciation.

Barter Income is income and technically should be claimed as income, and in this case is also deductible if it is business related.