Need help with your craft business taxes? When every cent counts and keeps your doors open, you’ll want all the help you can get, and that includes deducting every expense possible. However, you may not be including all the deductions you’re owed! Knowledgeable crafters all use the following deductions to their advantage, so make sure to read on so you can save money in the future.
A dollar at an antique store for the perfect part to your latest creation. Ten bucks for yarn. Five dollars for buttons and broken glass chips at the craft store. These expenses may not be much at the time, but crafters know how quickly it all adds up.
Instead of just eating them as the cost of running your business, make sure to add all of these little payments on your tax forms as a deduction! Everything you use to make your product is a business expense and therefore deductible. Just make sure to save receipts. (This can get a smidge complicated, so check here for the difference between supplies and Cost of Goods Sold.)
Even if you mainly sell out of your home, you still will incur travel fees. It could be for a trip across the state for a crafts fair or just several jaunts to the post office to mail packages. Whatever you travel for, every bit of it is deductible on your taxes. The vehicle mileage deduction takes some work, because you need to log each mile driven, but it will be worth it when you get to deduct 55.5 cents for every mile driven!
3. Home Office
Most crafting businesses are run out of the home. Nevertheless, you may still be able to deduct office expenses on your taxes. There are several criteria your home office must meet if it is to be deducted; mainly, though, the IRS wants you to have an “official” office. In other words, the room you use for your office should be used as an office and nothing else.
To go along with the home office, percentages of your bills that help you run your business can be deducted. For example, if you mainly use your Internet for work, then you can deduct a good portion of it on your taxes. If you use a small percentage of your phone for work, then you only deduct a small portion from your taxes. It’s best not to overestimate as the IRS may call you on your bluff.
5. New Equipment
Upgrading your equipment certainly qualifies for a healthy tax deduction. After all, you can’t operate if all your stuff is out of date, right? So the next time you pick up something as big as a new computer or even a new glue gun, keep it in your records for the next time you have to file. Keep in mind that longer-term use items like computers and office furniture may be subject to “depreciation,” and need to be deducted over a number of years. When you get into topics like depreciation, a trusty accountant always comes in handy!
We can’t stress enough how important it is you keep all your receipts. Not only does it help you at tax time, it’ll come in handy just in case the IRS decides it wants to confirm all your paperwork. Of course if you already use Outright to track your income and expenses, your job is halfway complete already!
For further reading: What You Should, Must and Never Expense During Tax Time
This post was brought to you by Outright.com, the easiest way to manage your business finances, online and automatically!