Your clients probably look to you to tell them what deductions they can take to lower their tax bill or increase their refund. But sometimes you need documentation from them to take these deductions. We cover what write-offs your clients should be aware of in this article.
How can I explain a write-off to my client?
A write-off is a slang term that describes an expense that qualifies as a tax deduction. Qualifying deductions can be deducted from your client’s total business revenue to determine their total taxable income. Taking write-offs is common among small business owners.
To qualify as a deduction, the write-off must be essential to running a business and common to the business’s industry. According to the IRS, a write-off doesn’t need to be 100% necessary, but it should be considered a normal expense that helps run the business.
Most business expenses are deductible, either fully or partially. As a result, small business owners tend to write-off as many qualifying expenses as possible to decrease the tax they need to pay.
What are some business expenses that my clients can write off for their small business?
Small businesses can typically write-off expenses in the following categories:
- Advertising and marketing expenses
- Business use of car
- Business use of home
- Contracted labor costs
- Depreciation
- Education and training
- Salaries and employee benefits (such as health insurance)
- Insurance
- Interest
- Inventory (costs of goods sold)
- Legal and professional fees
- Meals and entertainment for clients
- Miscellaneous (bank fees, wages, etc.)
- Office supplies and postage
- Office rent and leases
- Retirement plans for employees
- Supplies (internet, equipment, etc.)
- Startup and organizational costs
- Travel
- Utilities for office space
Are there any charitable donations that qualify as a write-off for my clients?
Yes. The following charitable donations may qualify as a write-off. Your clients can deduct money given to:
- Qualified religious organizations
- Qualified nonprofit schools and hospitals
- Qualified nonprofit organizations
Are political contributions tax deductible for my clients?
No. The IRS states that money contributed to a politician or political party can’t be deducted from your taxes.
Give the following list to your clients to reference if they frequently make political contributions. If your clients made contributions, donations, or payments in support of any of these, they client can’t deduct the amount from their taxes:
- Political candidate or party
- Admission to dinners or programs for a political candidate or party
- Political Action Committees (PACs)
- Campaign committees
- Advertisements in convention bulletins
What form(s) do my clients need to fill out to report their write-offs?
Charitable donations
Your clients need to file Form 8283 to report their charitable contributions when the amount is more than $500.
Small business write-offs
Your clients need to file a Schedule C to deduct their small business expenses.
