Tax time, how much have you been able to expense?

[rfung]

Adsense being what it is, you can kinda sit on your butt and just collect the money. Meaning (in my case) I don't have that many expenses, compared to the money I've made!

So, just throwing it out there, and trying to avoid pundits who think 'the more taxes, the better', strictly speaking of _real_ expenses compared to your real income what kind of ratios are you getting? I'm basically paying 20% on the income I've made, which is kinda of, well, a lot, and no matter what expenses I'm coming up with (single guy, no investments) I'm really going to pay through my nose.

[Rodney]

This link has some good charts comparing the self empoyed 401k to a SEP contribution limits.

Thanks! Now if only this topic was started in October-December of last year I'd be golden.

At least I'll be prepared for next year. This is one of the best tips I've stumbled across in a while :)

[nuevojefe]

My biggest expense is travel (i.e., researching the places that I write about for my travel-planning site). It's a fairly small percentage of my gross revenue, but it still adds up to a significant amount of money over the course of a year.

Hi EFV,

Because it's <em>actually</em> for a travel-planning site, how much of those expenses can you write off?

From your departing flight to your returning flight... are you writing off just about everything including and in-between? (I'm bugging my accountant enough this week; figure I could squeeze a little info outta you! ;-) )

Thanks!

[LifeinAsia]

Because it's <em>actually</em> for a travel-planning site, how much of those expenses can you write off?

If it's business related, you write off everything related. That includes the plane ticket both ways (and all associated taxes/fees), taxi or car rental at your destination. Hotel at your destination. Meals during the trip (actual or per diem). Any business-related expenses (admission to attractions if you're reviewing them, sneding/receiving faxes & using the hotel's business center, high speed Internet access at the hotel). Taxi fee & tip between your home & airport (both ways) or mileage both ways and parking (if you drive).

[nuevojefe]

LifeInAsia,

Thanks, that's what I was assuming. Sounds GREAT.

I recently snagged an 11 y.o. domain with top rankings for some great local terms which I'm rapidly developing into the best local portal period. I'm excited at the write-off opportunities this looks like it will provide me.

[Publisher]

My question is what classification Hosting should be put under? Is this an Equipment rental? Utilities? or Just a basic office expense?

List it as Hosting. The IRS doesn't care about internal classifications. All the care about is if it's income or an expense. You can call it what you like.

[baseops]

Hello - 1st post on the forums, although I have been an avid reader of it for years and a prolific affiliate marketer for 5+ years.

A few E-Commerce Tax Tips:
-For business meals (local or when traveling), you can only write-off 50% of the costs.

-For computer hardware / equipment / furniture, etc. you CAN write it all off in the current tax year, (instead of depreciating it) - this is called a SECTION-179 deduction.

-How much can you write off? You can write off up to the sum of your business income, normally...

-However, you can write off MORE than you made (file for a loss) for up to TWO consecutive years and still consider your endeavor a "business". After the second year at a loss, if your third year does NOT turn a profit, your business is now classified as a HOBBY and you can no longer file for a loss.

-As mentioned in this thread, a great way to save money AND reduce your tax footprint is to create a "Solo-401K" -- which is a personal 401K account (thanks to the 2002 Bush Tax Cut). This allows you to save (PRE-TAX) up to $45,000 per year!

All of these items listed can easily be googled under the subject: "small business tax write offs"

[ogletree]

I expensed:

1. Hosting
2. Domain Register fees
3. Expenses for pubcon
4. Overdraft fees when Adwords took out more than I thought they would sooner than I thought they would
5. PPC
6. Software
7. software development
8. WebmasterWorld membership
9. fees I paid to services like keyword research
10. I was able to deduct part of my rent and part of my utility bills

I still owed a ton. It sucks to pay a lot of taxes but it is cool to make a lot of money without spending much. That means you have a lot more money than others to spend on whatever you want to.

[hunderdown]

For business meals (local or when traveling), you can only write-off 50% of the costs.

NOT true. You can claim all of your own meals. The 50% limit applies to "entertaining." If you take 3 clients out to lunch and pick up the tab, you can only write off half of the total. If you eat by yourself, while on a business trip, you can write it all off.

[europeforvisitors]

Better read the IRS instructions of meal deductions before risking trouble:

[irs.gov...]

Also, if you don't know any of this stuff, your best bet (short of hiring an accountant) is to use a program like TurboTax or TaxCut that will walk you through an "interview" and make the correct deductions for you. That's a much better strategy than relying on forum posts.

[Porkchop]

I thought I would add a few more write offs that I didn't see here

Mileage...to check the post office box, make bank deposits, visit the cpa etc.
Post office box rental fees
Pay pal fees (when excepting credit cards)
Media/Subscriptions-we have to keep up with all the lastest trends etc. Write off the newspaper, magazines, cable tv

Another legitimate expense is for home security. Your dog!
If you never owned one, never planned on getting one but got one only to protect your home office and business assets than take 100%. I really don't think the IRS would take the bait on this one. On the other hand....you can choose to allocate a portion to personal and a portion to Sch C I chose 20% of the expenses. That lets the IRS know that I do recognize this as a pet also. Count the cost of the dog, food, vet bills, sweaters, training etc.
This was new for me this year. My cpa always goes to tax conferences each year and this issue came up.

I paid in a lot and will be making estimated tax payments during 2006.

[hunderdown]

Thanks, EFV, and my apologies to the poster I was "correcting." Always best to follow the official guidelines, and not rely on one's memories of what's what, as I was doing.

[BillyS]

As mentioned, there are some great tools for figuring out what you can and cannot deduct. TurboTax and the like are great, can be completed from your home and cost less than $75 (including filing fees) - well worth the money if you find a deduction or two (and the fee is tax deductible).

If you qualify for a home office (which is harder than some think) you can also start to deduct some of your home related expenses (utilities, improvements).

As EFV points out, don't automatically assume you qualify for a deduction.