Business taxes and personal taxes are complicated. That’s why it’s so delightful they’re even more enigmatic this year. Not. Of course, we’re talking about the new tax code that went into effect as of January 1, 2019. But while we can all moan and groan about the new reimbursement rates, deduction regulations, and tax brackets we have to learn, we still need to know the basics of 2019 tax write-offs so we don’t underpay or leave money on the table.
We’ve been around the block as employees with W2s to independent freelancers with 1099s to business owners of an s-corp with its own rules and regulations for taxes and business expenses. We know more about taxes than we ever hoped to. But that’s entrepreneurship for ya, right?
Below, you’ll find 10 tax write-offs for 2019 and the top expense tracking tools we use to stay organized and make tax season less hellacious. Trust us, staying on top of your books and keeping your head out of the sand makes tax season much easier—and actually, more profitable too.
10 2019 Tax Write-Offs for Business Owners and Freelancers
The biggest change with the 2019 tax code seems to be rates of reimbursement. Many of the tried-and-true deductible categories remain, like
1) Gas Mileage
We don’t drive much—being a 100 percent remote agency and all. However, we do track the mileage we put on our cars for meetings around town. In 2019, businesses can deduct $0.58 per mile compared to $0.54.4 per mile in 2018. While that might seem paltry, it adds up! When you track your mileage for every business meeting and errand, you may have thousands of dollars to deduct as tax write-offs this year. Lower income amount = lower taxes = more money in your pocket.
2) Rent for Office Space
We work from home. However, we can’t deduct our entire mortgage. Womp, womp. Instead, we calculate the square footage of our home offices and divide that by our total mortgage. There is a catch ,though. Your deductible office space must exclusively be used for doing business—no multi-purpose rooms like a den/office.
We’ve heard horror stories from our accountants about the IRS checking in on home offices, noticing a TV or wardrobe closet, and making that business owner pay back his or her home office deduction. That’s very unlikely. However, be honest and only deduct the space you use solely for doing business. Remember, this deduction is only for business owners. Full-time, salaried employees cannot deduct home office expenses.
Electricity, heating and cooling, and other utilities you use to power your home office may be deducted from your taxes. Albeit, this can only be a portion of your home’s utility bill. Use the same ratio you would for your home office to figure out a fair percentage to deduct utilities from your 2019 business taxes.
4) Phone and Internet
This is perhaps our biggest (and one of our only) overhead expenses. If you use your phone and internet solely for business, deduct the entire year’s worth of bills from your taxes.
5) Meals and Entertainment
This has been rolled back in recent years, but unless you’re renting out a penthouse in Vegas and trying to deduct it from your taxes, you’ll be fine. One of the tools we have listed below will help make managing your meals and entertainment expenses easier.
Hotels, transportation via Uber or rental car, airfare, train, baggage fees, and all travel expenses for work can be deducted. Save your receipts since these are typically more expensive than the $75 cut-off for not having to provide a receipt.
7) Business Equipment
If you buy a new laptop, TV, or any equipment to use for your business, you bet your bottom dollar you can write this off. This deduction sure makes buying expensive office equipment less stressful.
8) Bank Fees and Interest on Loans
Bank fees and loan interest add up throughout the year—taking a big cut out of your profits. Write all of these expenses off on your 2019 business taxes.
9) Contractor Payments and Employee Salaries and Wages
What you pay your contractors is considered an expense because at the end of the day, it’s a loss, not a profit. This should be easy to track if you use payroll and/or bookkeeping software.
10) Self Employment Taxes
When you work for someone, they take on a percentage of your tax burden. When you work for yourself, you hemorrhage all of this yourself. Luckily, that’s where self-employment tax deductions come in to make up for social security and Medicare taxes. When you work for someone, you pay 7.65 percent in social security and Medicare taxes, but 15.30 percent as a self-employed person (in 2018). Without getting too into the weeds, we’ll say this: as a self-employed person, you can deduct half of your self-employment tax from your net income and this is only based on 92.35 percent of your net—not gross—business income.
4 Business Expense Tracking Tools to Make Paying Taxes Easier
In our experience, manual expense tracking leads to forgotten submissions, fewer items to write-off on our taxes at the end of the year, and wasted time and stress doing it in bulk at the last minute. Use these business expense tracking tools for maximum 2019 tax write-offs.
We cannot profess our love for this app enough. It syncs with our accounting software, Xero. It automatically scans your receipts and takes a photo of them so you don’t have to save a pile of paper. Expensify auto-populates information like restaurant name and amount spent into each expense item to save you time. Plus, if you don’t feel like scanning a receipt, you can email your expense to Expensify and it’ll automatically upload it to your account!
You can also set Expensify to automatically reimburse you and your employees to save manual bookkeeping time to settle up each week or month. We love it and we’re sure you will too.
2) Mile IQ
For those who log a log of miles for your job, try Mile IQ. It’s a totally set-it-and-forget-it app that knows when you drive and logs your trips down to a fraction of a mile. This creates a paper trail for your to substantial tax write-offs later, plus it saves you a lot of time since you don’t have to do this yourself.
Xero also allows for expense tracking, but it’s not as fantastic as Expensify. What Xero offers is seamless integration of many expense tracking apps with your business’s bookkeeping. Use it with Gusto for Payroll, PayPal for invoicing and payments, and your bank to keep expense processing and business accounting organized and headache-free. At year-end tax season, you can download reports to send to your accountant.
A bookkeeper is a human being and not a tool or app, we know. However, ours also has an indispensable skill set we use to keep our business bookkeeping and accounting in order! We highly recommend you invest the $75–$500 per month for a bookkeeper to manage your payroll, accounts payable and receivable, and tax payments. Our bookkeeper has freed up so much of our time and gotten our books in clean, organized, and working order. He’s our favorite person on this earth—aside from our husbands.
Income tax season doesn’t need to send you into a tailspin or hear the Jaws score in your head as it slowly approaches. With proper education and business expense tracking tools, you’ll be able to stay on top of your taxes throughout the year so all you have to do is hand off electronic info to your accountant, sit back, and wait for your refund to deposit into your bank account.
Looking for more business advice? Read our top 10 tips for female business owners in 2019.