Happy small business week! The IRS changed a few deductions this year, so now that we’ve wrapped up 2011, let’s look ahead to what 2012 will bring us. Here’s a little reminder of what you can and cannot deduct if you are self-employed in Boston under the new IRS allowances, including Social Security.
• Car – There are two ways to deduct the expenses of drive your car: you can get reimbursed using the 2012 mileage allowance of 55.5 cents per mile, or you can deduct the actual expenses like oil changes, tires, gas and insurance. You cannot do both. Of course, tolls and parking fees are deductible either way.
• Health insurance premiums – Your health insurance premiums are 100-percent deductible.
• Social Security – as the president, CEO and owner of your company you get the honor of paying both the employee and the employer’s share of Social Security and Medicare taxes. You only get a deduction for your employer’s share. NOTE: Even though the employee’s share dropped two percent this year, the employer’s share remains at 7.65 percent.
• Home office and furnishings – if there is a specific place in your home where you regularly conduct your business or meet with clients, then you may be able to deduct portions of your real estate taxes, mortgage interest, utilities, insurance, repairs and depreciations on your house, and any furnishings necessary to set up a home office like your computer, desk, chair, phone and software.
• Travel and Entertainment – these are the two areas where the IRS starts to feel a little abused. Make sure you keep all records and receipts of your travel and expenses for legitimate business purposes including whom you met and what you discussed.
Source: boston.cbslocal.com, “Small Business Week: Deductions,” Dee Lee, May 22, 2012