If you are a procrastinator, you have waited until now to crank out your 2016 taxes. And, surprise-surprise, you owe more than you thought. Well, here’s a few last-minute ways to lower your tax bill. These are items I have come across with my own business over the years. But I’m no accountant, so check with yours to see if these items apply to your situation or if you have any questions.
Things that Reduce your AGI Dollar-for-Dollar
Most independent practitioners are self-employed, without an employer-sponsored retirement plan like a 401(k). If that’s you, you are responsible for your own retirement plan. So, open an Independent Retirement Account (IRA). Self-employed folks can actually contribute up to 20% of your net self-employment income.
If you’ve got an HSA-eligible insurance plan, you can also put money into a Health Savings Account (HSA).
You can still make IRA contributions and HSA deposits for 2016 until midnight Tuesday (April 18th).
Expenses to Remember
Start-Up Costs – If you spent money even before you started your practice, you can deduct those expenses as start-up costs.
Home Office – If you use a part of your home for your practice, you can deduct certain home expenses.
Inventory – Service-based businesses (like you) can treat inventory items as materials and supplies, as long as you use the cash method rather than the accrual method of accounting.
Vehicle Expenses – You can deduct expenses for the business use of your vehicle.
Interest Payments – If you put business equipment on a credit card, the interest you paid is deductible.
Marketing Expenses – You can deduct costs associated with marketing and advertising your practice, including your website, business cards, brochures, gift certificates, postcards, ads you placed in the local wellness newsletter, etc.
Contract Labor – Did you share a gig with someone and then pay them out of what you were paid? That’s labor you contracted and you can deduct it.
Bank Fees – Deduct the bank fees you paid for your business accounts.
Non-Cash Charitable Contributions – Did you donate a gift certificate for a charitable event? Did you give anyone a “free” treatment? The value of those items may also be deductible.
Unreimbursed Employee Expenses – If you work as an employee, you can deduct certain expenses that your employer did not reimburse you for like education, clothing, etc.
Student Loan Interest – You can deduct the interest you paid on your student loans.
Health Insurance Premiums – If you are self-employed, you can deduct health insurance premiums as a personal expense.
Other Professional Expenses
Liability Insurance Premiums
Professional Licensing Fees
Professional Association Fees
Tax Preparation Fees
… and the list goes on …
I’m sure you can think of even more ways that you have invested in your practice, that can be included in your list of deductible expenses. If you have any suggestions for other practitioners, please include them in the comments section below.
By the way, this is our 300th blog post. (Wow!) We hope you are receiving value from these posts, as we are enjoying collecting useful practice information for you. We invite you to send topic ideas and questions to sma.blog@sohnen-moe.com, so that we may continue to bring relevant information your way.