Section 179 gives contractors big tax breaks for making significant purchases, like heavy equipment and vehicles intended for business use. It allows you to invest in your business instead of paying extra taxes to Uncle Sam when you purchase new machinery like sanders, vacuum systems, and other important hardwood floor equipment.
But your smaller operating expenses can also add up to give you significant tax breaks. (Click here for the official Section 179 rules.)
Here’s a list of some smaller but notable expenses that you’ll be able to deduct from your 2015 taxes:
Travel expenses are big for contractors because you’re constantly traveling to different residences and facilities to do your work. Luckily, you can deduct the amount of miles you travel for business purposes. For 2015, the IRS’s standard mileage rate is 57.5 cents per mile when traveling for business.
If you also use your truck, van, or car for personal purposes, you can only deduct the percentage of miles that you use for your business.To take full advantage of the mileage deduction, keep records about how far you drive for work-related purposes. (Note: The mileage deduction doesn’t include traveling between home and your office or regular place of work. There are other exceptions to this deduction––check them out here.)
You can also deduct most travel, lodging, food, and entertainment costs related to business trips you take, like overnight trips. Travel expenses can really add up, so make sure to take advantage of these tax breaks.
Be sure to deduct maintenance costs, insurance, registration, and other expenses associated with your vehicle in proportion to the percentage you use the vehicle for work. Here’s an example from the IRS website to help you figure out how much you can deduct for these expenses:
“…if, based on records maintained by a taxpayer, total actual vehicle expenses for a given year are $2,500 and the vehicle is used 75 percent for business, the allowable deduction using the actual expense method is $1,875 ($2,500 x 75 percent).”
You can also deduct the parking fees or tolls that you incur from traveling to your clients. (Note: You can’t deduct the tolls or fees for parking near your home or main office.)
Office and accounting expenses
Write off your phone bill if you have a line dedicated solely to your business, or the percentage of your regular phone bill that is used for business purposes.
Don’t forget to deduct general office expenses, like the supplies that you need for running your business on a day-to-day basis. These deductions can really add up. (Did you know you can deduct the cost of cleaning services for your office? Check out this list of other “unsung” tax breaks.)
You can also deduct ATM fees, card fees, and interest payments on the debit and credit cards you use for business transactions.
You might also be able to write off the insurance premiums related to your business, such as you your liability insurance.
You can write off web hosting charges, which gives you yet another reason to market your contracting business online if you haven’t started yet. Any costs you incur for advertising your business are deductible.
Do you subscribe to Hardwood Floors Magazine or any other publications related to your trade? You can write off your subscription costs.
If you have a retirement plan set up for yourself and/or your employees, you might be able to deduct your contributions to these plans. The IRS says:
“SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. You can deduct contributions you make to the plan for your employees. If you are a sole proprietor, you can deduct contributions you make to the plan for yourself.”
You also might be able to deduct the costs for educational programs that you enrolled in last year to improve your skills. Check out the full details about education and training-related deductions here.
Some final tips
If you want to take full advantage of the tax deductions available for self-employed individuals and small business owners, meticulous record-keeping is a must. Make sure that this year’s records are thorough and accurate so you can claim as many deductions as possible when it’s time to file.
Certain software can help you organize your tax-related documents and transactions. Software like QuickBooks can import your transactions and help you sort them into personal and business categories. It also helps you file your quarterly taxes and estimate your upcoming tax payments so you don’t get hit with any surprises. Plus, you can write off the subscription fees or payments you make for this software as business expenses.
Please note: This post is intended to offer ideas and opportunities, not specific tax advice. Please consult with your tax professional(s) concerning your specific situation.