Depending on what industry you’re in, you might pay anywhere between $10,000 to over $100,000 during the first year of running your business. Not to mention, there are ongoing costs too, so entrepreneurship can be very expensive.
The good news is that you can deduct expenses when doing taxes. And as a result, you can reduce the money leaving your bank account.
If you don’t know where to start, then you’re in the right place. Here’s an in-depth LLC expenses cheat sheet you can use so that when tax time rolls around, you’re prepared.
Office Expenses
Do you rent office space or have coworking memberships? Then you can deduct these fees from your taxes. In addition, the following utilities for your office apply too:
- Electricity
- Water
- Gas
- Internet
If you work from home, then one of the best tax write-offs for your LLC is for your home office. You can deduct a portion of rent or your mortgage payments, as well as utilities and property taxes.
Business Supplies
Not only can you deduct your office expenses, but also your business supplies, such as pens, paper, notebooks, and printer ink.
Technology applies too. Electronics you can deduct include:
- Computers
- Tablets
- Printers
- Phones
- Software (Microsoft Office, Adobe, CRM tools, etc.)
- Cloud storage (Google Drive, Dropbox)
- Business tools (Slack, Zoom, or project management platforms)
Maintenance and repairs are included too.
Professional Services
Any legal fees you’ve paid for setting up and/or maintaining your LLC can be added to the list. Plus, if you’re paying for consultants, business advisors, accounting, or bookkeeping services, these are also considered deductible expenses.
What’s great is that if you haven’t set up your LLC yet, you can use our free business registration service. You’re only responsible for the state fee, which can significantly reduce your startup expenses.
Licenses and Permits
As part of the laws and regulations surrounding your industry, it’s very likely that you have to get licenses and permits to operate your LLC. You can deduct:
- State and local business licenses
- Industry-specific permits
- Renewals and registrations
Marketing and Advertising
Having a solid marketing plan for your LLC is essential in attracting customers. However, marketing and advertising can cost a pretty penny.
You should be happy to hear that both online and offline efforts can be deducted. They include:
- Google Ads
- Facebook ads
- LinkedIn ads
- Domain registration
- Website hosting and maintenance
- Business cards
- Flyers
- Promotional merchandise
Travel and Transportation
In some industries, you must travel to meet clients, vendors, and partners. You don’t have to shoulder all those costs yourself though.
If you’re driving yourself, you can deduct:
- Mileage for business-related driving
- Parking fees and tolls
- Vehicle maintenance and fuel (if used primarily for business)
Other things you can deduct are:
- Airfare, train, or bus tickets
- Hotel stays and lodging
- Meals during business trips (typically 50% deductible)
- Car rentals and ride-share services (like Uber or Lyft)
Employee and Contractor Expenses
Payments to both independent contractors (1099 workers) and salaries/wages for employees are both deductible. That’s not all though.
Payroll taxes and employee benefits count too. In addition, if they go through training and development programs, you can deduct these expenses.
Business Insurance
In most cases, getting business is not only a necessity, but also required by the law. It’s an expense that may save your entire LLC in the future, so it’s worth having.
Types of insurance that are deductible include:
- General liability
- Professional liability
- Workers’ compensation
- Cybersecurity
Bank and Financial Fees
It’s a pain paying for monthly maintenance fees tied to business bank accounts. However, you can deduct these fees from your taxes, which can be a huge relief. This also applies to any loan interest or fees on business loans.
Does your LLC process credit card payments? Then merchant service fees also apply.
Professional Development
Should you take courses, get certifications, or go through training relevant to your industry, then these count as deductible expenses.
There are professional growth deductions too. They include:
- Books
- eBooks
- Online subscriptions
Other education and memberships included are:
- Industry-specific memberships and association fees
- Trade shows and conferences
- Networking group fees
Meals and Entertainment
This may come as a surprise, but meals and entertainment can count as deductible expenses! For example, if you take clients or prospects out to dinner, then 50% of the expenses are deductible.
Entertainment regarding your own company counts too. You can deduct company events or team-building activities, as well as gifts to clients or employees (up to $25 per person annually).
Depreciation
We’ve told you that you can deduct purchases for things like equipment and vehicles. But did you know that you can keep deducting throughout the years based on depreciation?
For instance, when you use computers, machinery, or tools over multiple years, you can keep adding them to your deduction list come tax time, even if you made the purchases a while ago. Vehicles or other large purchases can be deducted based on IRS depreciation schedules.
Taxes and Regulatory Fees
LLCs already come with certain tax benefits, but there are even more things you can add to this tax deduction cheat sheet. They are:
- LLC annual filing fees
- Franchise taxes (if applicable)
- Self-employment taxes
Miscellaneous
Other items that count as expenses include:
- Postage and shipping costs
- Courier services
- Costs related to securing business loans or investors
What Deductions Can I Claim Without Receipts?
Generally speaking, the best-case scenario is to save all receipts. They’ll be needed as proof if you’re ever audited.
With that said, don’t go into full panic mode if you don’t have all your receipts. You can also show bank statements, bills, or invoices. For some claims, a detailed log of things such as dates, amounts, locations, purposes, etc. works too.
Tax Loopholes for LLCs
There are often tax loopholes for small businesses, and LLCs are no exception, although we’d call them more legal strategies and advantages.
For one, LLCs are pass-through entities by default. This means that profits and losses “pass through” to you, and the taxes are on your individual tax return; the LLC won’t have to pay taxes itself. With this setup, you can avoid double taxation, which happens with a C-corporation.
An S-corporation election will benefit you further by reducing self-employment taxes. You must split the revenue into a salary for yourself and business dividends.
You can also make qualified business income (QBI) deductions. You can deduct up to 20% of your QBI.
Use This LLC Expenses Cheat Sheet
When tax time comes around, you might feel overwhelmed by everything you have to do, especially when you’re trying to minimize your tax obligations. But with this LLC expenses cheat sheet, you’ll have a much easier time making claims.
Of course, you should always check current IRS guidelines for changes in deductible categories. And you should be aware that not all expenses are 100% deductible, as some are subject to limits or partial deductions.
Sign up with Business Anywhere if you need to form an LLC. You’ll get a free year of registered agent service too.
