With tax day quickly approaching, let’s talk about tax write offs for your creative business!
A write-off is defined as a business expense used to reduce your taxable income. When you purchase something for your business, you are able to deduct that amount from your taxable income.
Keeping track of all your deductions can be stressful, but you may end up overpaying in taxes if you don’t take advantage of some of the biggest write-offs available! So, what are these common tax write-offs? Read on to find out!
Tax Write Offs For Your Creative Business
Home Office Expenses: Have you turned a spare room in your house or apartment into a home office space? If so, your are able to deduct expenses for the business use of your home! This includes things like mortgage interest, insurance, utilities, repairs and depreciation. The simplified version of this deduction allows you to deduct $5 for every square foot of your home office, up to a maximum of 300 square feet.
Travel Expenses: Many creative business owners spend a lot of time traveling around the country for sessions, workshops, or weddings. If that’s you, the good news is that you can deduct most travel expenses from business trips if there is a business purpose behind the trip.
If you want to deduct travel costs, you’ll need to demonstrate at least one of the exceptions below are true:
- You did not have substantial control over the timing and logistics of the trip.
- If traveling outside the US, you were not abroad for more than 7 days.
- If traveling outside the US and you were abroad for more than 7 days, you spent less than 25% of your time on personal activities.
- Vacation was not a major consideration.
Be sure to hang onto all of your receipts and keep detailed records from your travels!
Meals and Entertainment: Taking a client out to eat? Purchasing a meal while on a business trip? You can deduct most meals and lodging for business travel, client meetings, and office meals from your taxes. As of 2020, you can deduct 100% of meals and beverages bought from a restaurant.
Tax Write Offs For Your Creative Business
Miles Driven: If you are a road warrior (like me!) and travel a lot for your business, you can deduct mileage from your taxes. Add up all the miles you drove for your business and multiply by the IRS’s standard deduction rate to figure out your deduction. Utilize an app such as Mile IQ or Quickbooks to easily keep track of all those miles!
Cell Phone Expenses: If you use your cell phone to do your work, this can be deducted too. Most creatives have one cell phone they use for both business and personal reasons. The cost of your phone bill can be split based based on how much you use your phone for business purposes.
Advertising and Marketing: Anything you use to promote your business and bring in new customers (from social media ads to billboards) is 100% deductible.
Education and Conferences: Have you incurred expenses related to coaching, workshops, online courses, or books? If so, these can be deducted as a business expense.
Software: Adobe Creative Cloud, Honeybook, Canva, Dropbox, Google, etc are all considered write offs.
Tax Write Offs For Your Creative Business
Repairs: Camera maintenance, computer issues or a broken lens may happen from time to time. If you need repairs or to have yearly maintenance on equipment, you can write off those costs on your taxes too.
Insurance: No matter the kind of creative business you are running, you want to protect it. The best way to do that is to have insurance in place! Insurance premium costs such as liability or a business owner’s policy are deductible.
Legal and Professional Fees: You are allowed to deduct any legal and accountant fees that are related to your business operations. This includes fees for tax advice or the preparation of the business portion of your taxes.
Debt Interest: In my personal opinion, the best way to run your creative business is to run it debt-free. Debt is not a tool to grow your business, rather, it dramatically increases risk. If you’re not careful, business debt can lead to years of stress, endless payments, and even business closures.
If you’ve already taken out a loan for business purposes, you can deduct the interest you’re paying on the loan. Pay off the debt as quickly as possible and never borrow for your business again!
Maximize Your Write Offs!
When it comes time to do your taxes each year, managing all the write-offs can be overwhelming. Utilize the above list to help guide you in completing your taxes. If you don’t already, use a bookkeeping software such as Quickbooks to keep everything in order –– it’ll save you many headaches. Promise!
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