LISTEN: Tax season is always scary, and with this year’s new code, the fear is elevating. Don’t worry, help is on the way. Meet accountant Howell Cheek with Sigrist, Cheek, Potter & Huyser who can talk about the philosophy of taxes dating as far back as Plato (but don’t worry, he doesn’t).
Kim talks with Howell, who offers easy-to-understand, concise tips about medical and charitable deductions, as well as the increase in the standardized deduction. He also talks about which business-tech deductions have been eliminated and why. Howell breaks it all down for us.
April 15 is going to be here before you know it. And people are freaking out about the Tax Cuts and Jobs Act, a new law that went into effect that limits personal exemptions for 2018. What’s changed? Can you still deduct technology and unreimbursed expenses from your employer? If you use a personal laptop for work, or you work from home – can you deduct your home office expenses? Cable TV? Internet service?
Accountant Howell Cheek, with Sigrist, Cheek, Potter & Huyser based in Scottsdale, Ariz., explains the new law.
Good news for employers: You can still deduct technology expenses. For employees? Bad news. You can no longer deduct unreimbursed expenses for personal technology that you use for business. For freelancers and independent contractors? You’re good to go as far as those deductions, as long as you meet certain criteria.
How can you get around those unreimbursed expenses? Well, the IRS seems to be leaving it to employers and employees to work out amongst themselves. Howell says you can track your work expenses and ask your employer to reimburse you.
For freelancers, you have to meet certain criteria. The IRS wants to make sure you are working for profit, and not just doing the work as a hobby. The following is what business owners and independent contractors can still deduct from their taxes.
Deduct hardware expenses from your taxes
Let’s start with what might be one of your biggest expenses: the hardware you need to perform your work. This could include desktop and laptop computers, a cellphone, a tablet, a laser printer, monitors or recording equipment.
Here’s what the IRS says about business expenses in general: “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.” Use this as a guideline for your tech deductions.
Don’t overlook the little things, like printer cartridges, backup drives or memory cards.
Deduct the cost of internet access and cell service
A business owner’s phone plan is their connection to customers and clients. You rely on your office internet plan to stay in touch, conduct research and update your website and social media presence. That means the cost of your monthly plans can be a deduction.
There may be some other internet-related costs you can write off. The IRS says, “Generally, you can deduct internet-related expenses including domain registration fees and webmaster consulting costs. If you are starting a business, you may have to amortize these expenses as start-up costs.”
Deduct software expenses from your taxes
Software can be just as important as hardware. You may need specialty image or video editing software, an invoicing app or a high-powered office suite to do your work. Those software expenses are likely going to be good candidates for deductions. This includes both one-off software purchases and those that require ongoing subscriptions. Again, make sure the software is necessary for your work.
While some technology expenses can be deducted all at one time, for others you may need to amortize them over multiple years. Your accountant or tax specialist can help you sort out the best approach and advise you on what technology qualifies for a deduction.
Deducting technology expenses is a tax-time perk that can be a huge help to the self-employed and business owners. Just make sure you have all your receipts and paperwork in order to take advantage of these useful deductions.