Stay tuned! Check out our latest videos, television appearances and podcasts.
![]()
Commonly Missed Deductions
Q: What Deductions are most commonly missed?
A: As you probably know, most business deductions come right out of your business checkbook. Any expense that is incurred in the course of your business activity that is ordinary and necessary will be deductible in some form. Therefore, the first step is to make sure you have captured all the data from your business checkbook and any other expenses that were incurred even if you paid some of those from another account. Try to avoid paying business expenses with cash simply to make sure documentation is adequate. However, if valid business expenses were indeed paid with cash, the amounts are still deductible; just make sure you maintain adequate support for the expenditures.
There are certainly deductible expenses that don’t show up as a specific cash disbursement and therefore are easy to miss. Perhaps the most common is the deductible expense related to the business use of your vehicle. Whether you use the standard mileage rate method or the actual expense rate method to calculate the deduction, the tax savings can be substantial. The IRS has a very good publication to help with the detail called Publication 463, Travel, Entertainment, Gift, and Car Expenses. You can download the publication for free at IRS.gov.
Another powerful deduction that does not appear in your business checkbook that is often overlooked is the Home Office Deduction. If you operate your business from your home and use a space in that home regularly and exclusively for business then a portion of the costs incurred to maintain your home are deductible. Those expenses would include your mortgage interest, real estate taxes, rent expense, utilities, repairs, etc. A portion of all of those amounts consistent with the amount of space you have dedicated to business use will reduce your taxable income and save some tax dollars. The best news is that this is money that you are already spending anyway but without the home office deduction, the amounts do not help your tax liability. The IRS has another good publication for assistance called Publication 587, Business Use of Your Home.
Perhaps the most commonly missed deduction is that which is available for investing in your own future. Congress allows us to deduct amounts that we invest in qualified retirement accounts via traditional IRAs, Simplified Employee Pension Plans (SEPs), 401(k) plans, and others. Best of all, the contributions that you make today can still be deducted on last year’s tax return. Contributions made up until April 15th, and in the case of SEPs, as late as October 15th can still reduce the amount of tax that you owe and help you keep more of your hard earned money. Most taxpayers can contribute up to $5,500 to a traditional IRA while small business owners can contribute up to 20% of the net earnings from their business to an SEP plan. Regardless of which fits your specific situation, make sure you consider options for a qualified retirement plan contribution before your file your tax return. The deductible contribution will help secure your future and will reduce the taxes you have to pay today.
As always, don’t forget that you are not alone. Bookmark our website at NASE.org as well as the IRS website at IRS.gov and you will always be able to find the help you need.