LLC Tax Deductible Expenses: Everything You Need to Know
There are LLC tax deductible expenses you can take advantage of to help lower your business's tax burden. 3 min read
2. Deductions for Starting a Business
3. Deductions for Books and Legal Fees
4. Insurance Deductions
5. Travel Expense Deductions
6. Interest Deductions
There are LLC tax deductible expenses you can take advantage of to help lower your business's tax burden.
Auto Expenses of Your Business
In many cases, you can deduct your business's auto expenses. For example, if your business owns one or more vehicles, or you use an automobile for business purposes, you can usually deduct your maintenance costs. While it may take you time to learn the rules for deducting auto expenses, it will be well worth the effort.
There are two options you can choose for deducting auto expenses:
- When you use the actual expense method, you will deduct all of your auto expenses related to your business and will also deduct the yearly depreciation of your automobile.
- The second method is called the standard mileage rate method, which is where you will make a deduction for every mile you drive as well as for parking fees and tolls.
For newer business cars, it's better to use the actual expense method, as your deduction will be much larger when it comes time to file your taxes. The reason the actual expense method can be more beneficial is that you are allowed to deduct depreciation. You are only allowed to use the standard mileage rate method if you make these deductions in the first year you use your vehicle for business.
Claiming deductions for accelerated depreciation in previous years makes you ineligible for the standard mileage rate method, as does taking a Section 179 deduction or bonus deduction. If you use your vehicle for both personal and business activities, you can only make deductions for driving related to business. Using your car professionally and personally means you will need to be meticulous about keeping track of when you are driving for business purposes.
If you only own one vehicle, there is no way you would be able to claim that it is used solely for business.
Deductions for Starting a Business
After you have started your business, you can deduct expenses such as:
- Business supplies.
- Office repairs.
Capital expenses are the costs that result from starting your business. In the first year that your business is in operation, you can take $5,000 for capita expenses. Over the succeeding fifteen years, remainders must be deducted equally. Businesses that are expected to be immediately profitable can circumvent this rule by waiting to pay certain bills until the business has officially started or by doing a limited amount of business. Because most businesses experience losses in their initial years, taking this deduction over a period of five years can be a good option.
Deductions for Books and Legal Fees
If you use business books, these are fully deductible. This includes books that eliminate the need to hire tax experts and legal professionals. When you pay a fee to a consultant, tax professional, or lawyer, you can deduct this fee in the year that it was paid. However, if you are paying the fee for future work, the deductions must be made for however long you benefit from the tax or legal services.
If you purchase insurance for your small business, you should be able to deduct the premiums.
Some insurance deductions you can make include:
- Employee's medical expenses.
- Business property flood, fire, and theft insurance.
- Insurance meant to cover losses from business debts.
- Liability insurance.
Travel Expense Deductions
If you are required to travel for your business, it's possible to deduct a variety of travel expenses:
- Plane tickets.
- Car maintenance.
- Taxi fares.
- Hotel rooms or other lodging.
If you mix business and pleasure while on your trip, you can still take these deductions as long the main purpose of your trip is business. It's even possible to take your family with you. However, you can only deduct your expenses, not your family's.
Many businesses use credit to make purchases for the business. When credit is used for business purchases, the carrying charges and interest are deductible. You can also take these deductions for personal loans that are used for your business. If your business earns more than $25 million in profits, you can only deduct 30 percent of your interest. When taking these deductions, you should make sure you're keeping detailed records that show you actually used this money for your business.
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