Money-Saving Tax School is in Session!
Everyone wants to pay less in taxes, so we try to “write-off” as much as possible on our returns.
I totally agree, but what can you deduct?
You should be able to use the full power of tax law to deduct everything possible!
The key to maximizing your deductions is knowing the distinction between business expense write-off vs. tax deduction write-off.
Business expenses include:
Office supplies like pens, paper, etc.
Buying a massage gun to use on patients
Association fees
Malpractice insurance
All of these expenses are needed to run your business, hence the name business expense.
Then there are things you can write-off in your tax return that are more of a tax deduction. Things like
Your vehicle expenses, for the amount you use your vehicle for work
Home office deduction, for the amount of square footage in your home you have a home office
Utilities like your cell phone bill, for the amount you use it for work
These expenses will (more or less) happen regardless of you having a business or not.
You will still own a vehicle
You still pay your rent, mortgage, hydro, etc.
You’ll definitely still have a cell phone
The way that I think about tax deductions is - these are extra write-offs that the government gives you for having your own business. These are normal expenses where you get to take advantage of a decrease in your taxable income.
As we go through the material, you’ll see that both business expenses and tax deductions are included in your bookkeeping and budgeting templates so we can better predict your income tax bill.
This distinction is also important to think about when opening your business bank account. The goal is to have all your business expenses come from that account; your tax-deductible expenses may always stay in your personal account.
For example, your rent payment will continue to come from your personal account; you just get to deduct, on paper, a portion of the rent from your income to reduce your taxes.
Exceptions include:
mobile practice: your vehicle is likely more of a business expense
If you incorporate: you can charge your cell phone 100% to the corporation
This mindset also applies to items that are gifted to you or you are reimbursed for. It’s always better to get a 100% discount from not having to pay for the item than to write it off and get a small percentage decrease to your taxable income.
There are so many other tax deductions you get to take on your return; things like childcare expenses, interest on student loans, and eligible medical expenses. These decrease your tax bill but are not business expenses and do not come from your business bank account.
RESOURCES:
Click here to book a free discovery call to talk about your available deductions.