[ad_1]
In the year Americans who are self-employed or start a business in 2022 will need to hire an accountant to file their tax returns to maximize their allowable deductions, an expert says.
“[If] If you own your own business, if you have your own corporation, if you have a rental property, I definitely want an expert because there are a lot of deductions that you can take that a lot of people don’t know about,” Luis Barajas, an enrolled agent and opportunity coach on PBS’ Opportunity Knock$, told Yahoo Finance Live (video above).
Many new business owners may not be familiar with deductions for business expenses, such as those that are ordinary and considered necessary for business.
“What people don’t realize is that any expense they use for that business can be taken for granted and necessary,” Barajas added.
What is common and necessary in one industry may be uncommon and unnecessary in another, so it’s important to consider what expenses your business needs before trying to eliminate them.
“So that’s the first thing every business owner should ask themselves,” Grant Dougherty, agent and founder of Dougherty Tax Solutions, told Yahoo Finance in a separate interview. “Is it normal? Is it necessary? Is it reasonable?”
For example, business owners can deduct items needed for administrative work, office supplies, or employee uniforms in the normal course of business.
Barajas shared two other deductions that business owners may overlook on their own: the home office deduction and the Section 179 deduction.
A home office deduction is allowed to any business owner who has an open space in their home that is used regularly and solely for the purpose of running the business. According to the IRS website, this location must be the principal place of business. The deduction is not available to W-2 employees.
“I’m able to take a fraction of the room I’m working on in my neighborhood versus the whole house, and I can reduce that price,” Barajas said. “I can deduct utility expenses. If I’m paying off a mortgage, I can deduct expenses based on my self-employed income tax deduction. I can deduct that percentage in property taxes.”
Barajas also shared the rule for writing off business expenses under Section 179.
“Section 179 deductions that most people don’t know about mean that when you buy a computer, you can write off the cost instead of deducting or buying a printer,” he said.
The IRS previously issued guidance for the Section 179 deduction.
“I can’t tell you how many times I’ve gone back and corrected people who had their own business or rental property that did their own returns. That’s when you need a professional,” Barajas said.
Rebecca is a Yahoo Finance reporter and previously worked as an investment strategist. Certified Public Accountant (CPA).
Click here for the latest personal finance news to help you invest, pay off debt, buy a home, retire and more.
Read the latest financial and business news from Yahoo Finance
[ad_2]
Source link
