An Insider's Guide to Tax Deductions

2022 is here, which means April 15th is not far behind. This considered it’s crucial to begin planning ahead for the tax season.

You have most likely exhausted most of your options as far as tax deductions go, but there may be some you might have missed with the potential tax changes on the horizon.

*It should be acknowledged that the information in this article is subject to change based on what may or may be altered with the proposed tax changes.

Corporate Gifts

Since the holiday season just passed, corporate gifting might have been top of mind for your company.

If you have employees who have birthdays, babies, or anything that requires a gift, corporate gifts can be deducted to a certain extent.

The Internal Revenue Service (IRS) states that “you [may] deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.”

Sole Proprietor Tax Deductions

As far as deductions go, it’s important to be aware that half the cost of your 1040 form can be deducted if you are a sole proprietor (an unincorporated business owned and run by one individual). 

As defined by the Social Security Administration, you are considered “self-employed if you operate a trade, business or profession, either by yourself or as a partner.” There are two income tax deductions that can reduce your taxes.

• The first is that your net earnings from self-employment are reduced by half the amount of your total Social Security tax. 
• The second is as mentioned above, where half of your Social Security tax can be deducted from your 1040.

Educational Expenses

If there are any events that you or your company has participated in for educational purposes, those can be written off as well.

For example, if you’re a Digital Marketing agency, and your team attends a conference about the latest social media updates for 2022, the cost of the conference can be deducted.

General Business Expenses

While you likely know that most business expenses can be deducted from your tax return, you may be leaving some unknown deductions out. But what is considered a business expense? 

• Any cost that is helping a business grow
• Any cost that is helping your team improve their performance

For example, if your HR Manager purchased an audiobook on human nature and communication styles, that can be useful for their role in the office - therefore deducted from your tax return. 

Office supplies also fall into the business expense category. (As we’re sure you know, that printer ink cost can really add up!) This also includes office supplies like pens, electronics, paper, organizational tools, and more. 

Home Office

Since hybrid and remote workforces have become the new normal, assisting your team in creating a home office that breeds productivity can be pricey. The good news is that cost can be considered a write-off for your 2022 tax returns.

In fact, this might even mean deducting a portion of your mortgage or rent as your office space. Of course, this calculation requires the square footage that is actively being used as a home office and applying that to your total rent or mortgage.

Travel Expenses

Your first thought might be, “Of course I can deduct the airfare for business travel,” but don’t forget about all the other expenses that come with travel. You can often deduct:

• Food
• Wifi fees
• Parking
• And more

Entertainment and Meals

Networking is a large part of most industries.

Networking usually consists of some form of entertainment or food. Any meals that are shared with prospects and/or current clients can be deducted. Any entertainment (or events) hosted by your company can also be deducted.

Donations

Lastly, charitable contributions are tax-deductible. Be sure to keep your records of charitable contributions in order to utilize the tax benefits of your company’s effort to give back.

At Centura Wealth, we have tools in place to assist our clients in using charitable giving tools to not only improve their bottom-line but, more importantly, to give back to their communities.

As you look towards the next year, it’s important to take a look not only at the upcoming tax season but also at your financial planning as a whole. At Centura, we understand that the intention behind your planning can positively impact your wealth management, read more in our article here about how intention can influence your financial planning.

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We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice.  We recommend that you seek the advice of a qualified attorney and accountant.

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