After settling down after the busy holiday season, another season is already here – tax season! Before you know it, April 15th will be upon us but the good news is there are certain business expense write-offs that can reduce the final amount due on your taxes as most freight agents and brokers are considered independent contractors. Keep in mind that while these deductions can be subtracted from both your regular income tax and your self-employment tax, you first need to determine which expenses are necessary business expenses and exactly how much can be deducted. Seeking a tax accountant for assistance is definitely wise and recommended.
If an expense is considered ordinary or necessary for your business, it is fully deductible. These expenses may include:
- Accounting fees
- Advertising
- Bank charges
- Commissions and sales expenses
- Continuing professional education
- Contract labor
- Credit and collection fees
- Delivery charges
- Dues and subscriptions
- Employee benefit programs
- Insurance
- Interest paid
- Internet subscriptions, domain names, and hosting
- Laundry
- Legal fees
- Licenses
- Maintenance and repairs
- Office expenses and supplies
- Pension and profit-sharing plans
- Postage
- Print and copy
- Professional development and training
- Professional fees
- Promotion
- Rent
- Salaries, wages, and other compensation
- Security
- Small tools and equipment
- Software
- Supplies
- Taxes
- Telephone
- Trade discounts
- Travel
- Utilities
If expenses come from both personal and business usage, they are only partially deductible. Such as:
- Home office
- Automobile and transportation expenses
- Meals and entertainment – only 50% is deductible
- Gifts -up to $25 per person
Some expenses, even when they are directly related to your business, are never tax-deductible. These include:
- Kickbacks or bribes
- Political party or candidate contributions
- Social club memberships fees and dues
- Penalties and fines
Keeping good expense records can be a struggle for any small business owner. One easy solution for freight brokers and freight agents to better manage their business expenses is to create a simple filing system with a folder for each month of the year. Every month, store the receipts in their respective folder and at the end of the year just hand the box over to your accountant and he does the rest!
It’s simple: The more tax deductions your business can legitimately take, the lower its taxable profit will be which means more money in your pocket to help grow your business.
The above post is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
