As a business owner one of your goals is to maximize your business deductions. However, the IRS does not provide specific guidance on what business deductions are allowed. This is a great opportunity for you to kick your favorite uncle where it really hurts.
The tax code states that all “ordinary and necessary” business expenses you may deduct.
Unfortunately most entrepreneurs and tax preparers do not go beyond of what the IRS provides on the tax forms, thinking that only the items listed on the form are the allowed ordinary and necessary. This is not true. While the items listed on the form are examples of ordinary and necessary business deductions there are “other expenses” that while they may not be necessary for some business they are for others.
Business expenses are not a “one size fit for all” deductions.
Here are some unusual and legal business deductions:
1. Pet Food – while you are not allowed to deduct the food for your house pet, if you own a watch dog for your business (it cannot be a family pet that you simply bring to work every day), you may have a valid write off of food, vet bills, training, toys and any other expenses associated with the care of the watch dog. Other examples is a cat who keeps down the rat population.
2. Body Oil and Sunscreen – pro body builders are allowed a deduction for body oil and tennis pro players may write off sunscreen products since they are considered protective gear for them. I would apply the same to construction workers who are exposed to the sun on a daily basis as part of their duties, sun screen would be protective gear for them.
3. Law Suit Settlements – If your business is sued and you lose, you may be able to write off the settlement amount as well as the legal fees you incurred.
4. Payments to Family Members – You may be able to hire your children to work in your business without incurring a payroll tax liability if they are under the age of 18. You may also hire your spouse and take a deduction for it. Make sure to comply with the labor law requirements to issue W-2s and 1099 when required.
5. Landscaping and Housekeeping – Today it is not uncommon for a business owner to have a functional office at home. If you have an office at home which you use to conduct your business and hold your meetings, you may deduct the cost of a housekeeper to keep the office area clean. Also, if you hold meetings in your home office, you may deduct a portion of landscaping costs as well.
As a business owner, you need to identify the business deductions that are ordinary and necessary for YOUR business.
You should not limit your deductions to the expenses that are necessary to your neighbor’s business and please do not limit yourself to the short list provided by the IRS. If you do, you will forgo allowable deductions that can be costly to you and your family.
It is a good idea to meet with your tax adviser and run the ideas by him/her and determine which ordinary and necessary expenses you are allowed to deduct.