Three Tax Deductions that Make Life Easier for Schedule C Filers

I encounter a lot of Schedule C filers in my practice. These are the people that in some way work for themselves. The self employed have a lot to deal with when it comes to maximizing their business expenses, whether the business is the main source of income or a side gig. And while many“ordinary and necessary” expenses vary business by business, here are some simplified deductions that make life easier for most self-employed people.

1)  Simplified Home Office Deduction – Since 2013, business filers have been able to use a simplified version for deducting expenses for business use of their home. This deduction allows taxpayers to expense a portion of their residence that is exclusively used on regular basis for business purposes. Ordinarily, you have to keep track of applicable housing expenses such as rent, insurance, electricity, gas, phone, cable, and internet. You then multiply that figure by the fraction of square footage of the office space over the total square footage of the entire property. With the standard procedure, you can just take the total square footage of the business space and multiply it by $5. Keep in mind, the space must be smaller than 300 square feet or you can’t use the simplified method.

2)  Per Diem Rates When Traveling Away From Home: Usually when you are traveling away from home on business, you need to keep receipts in order to verify what you spend on food, and incidentals. This task is especially cumbersome for people who travel a lot or drive for a living. However, you can use a standard amount allowed for those expenses instead of keeping records of your actual costs.  In 2014, using the regular per diem rate method, you are allowed $46 for meals and incidental expenses (M&IE). Transportation workers get a special M&IE rate of $59 per day ($65 for travel outside of the United States). You can generally only deduct 50% or 80% of the standard M&IE (depending on what you do). And while you don’t have to keep records of the actual expense, you still must establish the time, place, and business purpose of that travel.

3)  Standard Mileage Rate ­– As with the other examples, the standard mileage rate allows you to take a preset amount for your car expenses, rather than keeping receipts for costs like fuel, maintenance, and repairs. For 2014, the amount allowed is 56 cents a mile for business mileage, 23.5 cents for medical or moving miles, and 14 cents a mile for charity miles.  Again, while you don’t have to keep track of your actual expenses for your vehicle, you must keep a log that shows the time, place, and business purpose of the travel.

Schedule C filers have enough on their plate when it comes to running their businesses. These simplified methods can make it easier to maximize your deductions and the time needed to run your business.