Can I deduct my Medical Expenses on my Tax Return?
Medical expenses are an itemized deduction and therefore must exceed your standard deduction to be worthwhile. Your standard deduction is $24,400 if you are Married Filing Jointly as an example. Additionally, you are only able to deduct whatever amount exceeds 7.5% of your income. That is to say, first your itemized deductions have to be greater than $24,400, and then you can only deduct whatever amount exceeds 7.5% of your income.
When is my business tax return due?
Knowing how your business is taxed tells you how to file your taxes and when they are due. An LLC can be taxed as any of the following: Individual (Sole Proprietor), Partnership, S-Corp or C-Corp. Each of these tax structures has its own due date and requirements:
Sole Proprietor: Schedule C which is included on your 1040 (due April 15th)
Partnership: 1065 due March 15th (and the k1 must be included on your 1040)
S-Corp: 1120s due March 15th (and the k1 must be included on your 1040)
C-Corp: 1120 due April 15th (can be done entirely separate from your 1040)
For flow-through entities (which are all of the above EXCEPT a C-CORP), your estimated taxes are paid from your PERSONAL account and tied to your social security number. Only a C-Corp will pay estimated taxes from the company account with this being a company included expense.
How is my business income taxed and what expenses can I deduct?
Gross Revenue These are all receipts and types of income
- COGS Cost of Goods Sold (this is only when you have inventory usually)
= Gross Profit This is Revenue (or Profit) BEFORE any Expenses are Deducted
- Expenses Expenses should be reasonable and ordinary to your business.
= Net Profit This is the bottom line!
Net Profit is the number used to calculate your taxes. Other deductions or tax credits may further reduce this number; however, this is also the number used to calculate self-employment taxes OR estimated tax payments.
Examples of Expenses Include:
payroll, contractor payments, office supplies, job supplies, marketing, advertising, cell phone expense, utilities (for an actual rented facility – NOT a home office); rent (again for a facility NOT your home office rent); rented equipment or storage units; business licenses, other fees, professional services including attorneys and accounting; software, computers, fixed assets (which includes equipment, tools and other items used for your business); and reimbursements for mileage (of a personal vehicle used for business) and home office (which is a percent calculation of your office area and the expenses related to that).
What information do I need to have for a Home Office Deduction?
Your Home Office must be a separate and distinct area of your home used solely for business. You will need documentation for the following (and these expenses should be paid from your personal account and NOT your business account):
a. Square footage of the home
b. Square footage of the office area
c. If your own your home, we need (total paid for the year): utilities, mortgage interest, property taxes, home owners’ insurance, cleaning, home security, water bill, internet only, landscaping and any improvements made to the home that also affect the office area
d. If you rent your home, the we need the total rent paid for the year and total fees for utilities, home security, cleaning, renters’ insurance, internet only and any improvements to the rental that affect the office area
Or, if you choose to not itemize your expenses on the home office deduction and use the Simplified Method, we simply take $5 per square foot deduction for home office , up to 300 square feet, (a total of $1500 deduction), no questions asked, no expenses needed! Then, there is no depreciation recapture when you sell the property if you own the home.
Because these expenses are not paid from your business account in most cases, the home office deduction percentage will be a "reimbursement" on your Profit and Loss Statement (this may vary for partnerships and c-corps - speak with your Tax Professional for those specific tax structures).
What do I need to keep track of for a mileage deduction (in this case, we are referring to Schedule C business owners and shareholders receiving a mileage reimbursement from their company):
Mileage (You must have a written mileage log (even if you claim actual receipts):
a. Year, make and model of the vehicle
b. Starting odometer on January 1st (of the tax year)
c. Ending odometer on December 31st (of the same tax year)
d. Total business miles