List of Tax Deductions
If you don’t work from a list of tax deductions at tax time you may be paying too much in taxes. A tax deduction is an amount of money you are entitled to subtract from your gross income. The more deductions you have, the lower your taxable income will be and the less tax you have to pay. There are three basic types of tax deductions: personal, investment, and business. All deductions must have a legal basis. If the IRS concludes that your deduction wasn’t justified it will deny the deduction and charge you back taxes, interest, and in some cases penalties.
Here’s a list of tax deductions to help you prepare your tax returns:
- Meals and entertainment deductions – you may only deduct half of the total amount you spend on business entertainment activities. A meal can be a travel expense of an entertainment expenses. So, it is important that you document why an expense was incurred and the business purpose to properly itemize your deductions. To claim an entertainment expense you must be with one and more persons who can benefit your business.
- Car and local travel expense deductions – you can only deduct local business trips that are for business. Commuting is not tax deductible. If you have a home office that qualifies as your principal place of business you can deduct the cost of any trips you make from your home to another business location. To deduct your car and local travel expenses you can use the standard mileage rate or the actual expense method. When you deduct car expenses you must keep records of all the costs of owning and operating your vehicle. All passenger vehicle are listed property. This means that the IRS imposes more stringent requirements on deductions to discourage fraudulent deduction claims.
- Home office deductions – your home office will qualify as your principal place of business if it is the place where you earn most of your income or perform the administrative or management tasks for your practice. There are three threshold requirements to the home office deduction, you must: Be in business – use your home office exclusively for business (unless you store inventory in your home), and use your home for your business on a regular basis
To qualify for the home office deduction as an employee you must satisfy all the requirements above plus you must be able to show that you maintain your home office for the convenience of your employer.