Your LLC (Limited Liability Company) can ‘write off’ certain expenses. You want to make the right deductions for your LLC so that you don’t overpay tax.
This post will list and explain the expenses that qualify as write offs.
You’ll be surprised, some of them are not as obvious as employee salaries or inventory.
How Are LLCs Taxed?
An LLC is a pass through entity, so it’s taxed like a sole proprietorship or a partnership by default.
You can choose to file tax like a corporation too, but in most cases that would result in paying more tax.
Read more about LLC taxes.
What Can I Write Off as an Expense for My LLC?
The things you will deduct depend on your business model. Not all things will apply to your business, but take what’s relevant.
Rent as a Tax Write Off
If you run a physical business and are renting an office or a commercial space, you can deduct 100% of the rent. This can be one of the biggest expenses for your business, so it’s important that you include it in your tax calculation.
If you’re a digital nomad or run your business from home, a portion of your rent can be written off as an expense.
It’s a good idea to consult this with an accountant, but to give you an example of how much you can deduct we’ll look at some of the guidance set out by the IRS (internal revenue system).
The IRS has a simplified and complex version of calculating how much you can deduct for your home office.
The simple rule is $5 per square foot, with a maximum allowance of 300 square feet.
The more complex method asks that you calculate the percentage of your home that’s used as an office, then the percentage of available hours that you spend working. By multiplying the two numbers you get a percentage of your rent, that percentage can be deducted.
Bills and Expenses as Tax Deductions
You can also deduct a portion of your utility bills and insurance. Things like the internet, water, or heating all count as business expenses if you’re running your business from your home.
Again, it’s best to speak to an accountant, but generally speaking the percentage you use to deduct your rent can be used to calculate how much of your utility bills can be written off.
Writing Off Charity Donations
If you make any donations through your LLC, you can deduct them as a business expense. The allowance is up to 10% of your LLCs taxable income amount.
Home Office Equipment Deductions
If you bought a laptop, a new desk, stationery, or anything else related to your business then you can deduct it as an expense.
Laptops and other electronic devices that are also for personal use, cannot be deducted fully. You’ll have to figure out how much you use them for business and how much you use them for yourself, then figure it out as a percentage.
Meals and Entertainment and Travel Deductions
Taking a prospective client out to dinner or for coffee is a business expense and a great acquisition method. Don’t forget to deduct it.
Events for prospective clients also qualify as an expense. So does travelling to meet a client.
Insurance and Fees as Tax Deduction
If you pay professional liability insurance, permits, or practitioner fees—then you can file them as business expenses.
Virtual Mailbox
A virtual mailbox is a physical service that receives your business’ mail on your behalf and uploads it for you. This way you can receive your mail almost instantly, anywhere in the world.
You can deduct your virtual mailbox subscription as a business expense.
Online Business Services
If you run your business online you’re likely to be paying for different services like ClickFunnels, maybe WebinarJam or MailChimp. You might be paying a Zoom subscription or a Google Drive subscription.
Also contractors like graphic designers, business coaches, consultants, etc.
Educational Expenses as Deductions
Things like courses, books, tuition, events that you use to improve your skills and are related to your business are considered educational expenses.
Educational expenses are deductible because they are essentially business expenses that help you run your business and make a profit.
Digital Nomad Tax Deductions
If you’re a digital nomad and you’re changing accommodation frequently, you can still deduct a portion of your rental payments as expenses.
You can also deduct the cost of a co-working space.
Summary
Your LLC’s expenses go beyond just inventory and salaries. Things like rent, equipment, and even virtual mailboxes are write offs that will help you pay fair tax.
Anything that helps your business make profit and is costing your business can be written off as a deduction.
