You can deduct most of your employee expenses when it comes to your tax return, so long as the cost is business-related. Employees’ salaries and benefits are tax deductible, as are their children and spouses’ wages. You can also deduct business-related travel expenses, including hotels, plane tickets, and meals. Half of all meals paid for by your employees and customers can be claimed as business-related expenses. Similarly, you can deduct expenses for candidates traveling for job interviews, including airline tickets and parking fees. In addition, you can deduct the costs of your commercial space, including electricity, sewage, trash pickup, and cell phone.
Other business expenses that are deductible include rent, utilities, and mortgage interest. Renting space for a business is also deductible. Unlike other expenses, utilities and insurance for an office building or home are considered business-related expenses. Business expenses are also deductible if they are “ordinary and necessary” for running a business. Moreover, salaries and benefits of employees and bonuses are deductible. In addition, many other costs can be written off, including advertising and marketing.
Other business expenses that are generally deductible include office rent, salaries, supplies, equipment, telephone costs, and utilities. There are special rules for certain types of investments, such as large amounts of money or a new asset purchase. While these expenses may be deductible, the list of non-deductible expenses is considerably smaller than the list of taxable expenses. For example, some expenses can only be deductible if they are necessary for you to learn a new skill or advance your education. You cannot deduct expenses incurred for a different job. Miscellaneous business expenses include charitable contributions, repairs to your business property, consultants, and postage.
Employers can also deduct the cost of fringe benefits, such as retirement plans, health insurance, and life insurance. These benefits aren’t income for the employees, so your company can claim a tax break on the employee’s benefits. The tax laws change quickly, so you should check with your accountant to see if your employee benefits are tax deductible. In addition to health insurance, you can deduct company cars, business meals, and company discounts.
Business automobile mileage is also deductible. Although not every business trip requires mileage, you can claim your travel expenses when you use a car for business. This includes mileage you take for business, including local transportation. Your actual expenses can include gas, oil, tires, insurance, registration fees, and licenses. The IRS allows for two ways to calculate mileage-related expenses. One method is called the straight-mileage approach, where you multiply the number of miles you used your car for business by the allowed cents-per-mile (40.5 cents in 2006).
For businesses with an inventory-based system, the cost of goods sold can be deducted as business expenses. You must keep careful records and value inventory at the beginning and end of each tax year. The cost of products, including freight, raw materials, and direct labor costs such as contributions to pensions and annuities, can also be deducted as a business expense. Once you’ve calculated your expenses, make sure to write them off on your tax return.