Business Tax Deductions: How To Deduct Expenses Without Keeping Receipts

Business Tax Deductions: How To Deduct Expenses Without Keeping Receipts

No obtaining, no deduction, right? Oftentimes words, good. The mantra of small business bookkeeping has been relentlessly burdensome for decades: " No Acceptance, No Deduction. "

My own tax clients are quick to think back me of this basic recordkeeping rule. Over the years I ' ve heard this umpteen times: " But I don ' t have any receipts. I guess I can ' t take the deduction, right? "

What ' s my response to the " No Taking, No Deduction " bemoan? " Not so fast! Wherever there ' s a tax rule, there ' s an exception to the rule. "

In certain situations, taking deductions without a getting is actually sanctioned by the IRS. Here are three legal exceptions to the " No Receiving, No Deduction " rule.

EXCEPTION #1: Vehicle Profit You are allowed to deduct your vehicle expenses to the extent that you used your vehicle for business. If you drove your car 100 % for business, then 100 % of your vehicle expenses are deductible.

And you have two options for decisive those vehicle expenses: 1 ) The Actual Equivalent Course 2 ) The Wont Method

Our focus here is on Option #2 - - seeing with the Usability Course your vehicle market price is smartly the number of business miles times the certified IRS serviceability proportion.

For 2009, this rate is 55 cents per mile. In 2009, if you drove your vehicle 10, 000 miles for business, you can report a deduction of $5, 500 - - without having to keep any receipts for gasoline, oil changes, repairs and maintenance, insurance, etc.

You do have to document your business helpfulness via a written log of some sort, but this is much much easier than saving all those receipts for actual vehicle expenses.

EXCEPTION #2: Meals While Sojourn When trip out - of - town on an overnight business trip, you can deduct the actual market price of your meals ( by keeping the getting ), or you can rely on the little known " Per Diem Form " ( which requires no taking ).

The Per Diem Rule gives you a daily meal allowance for each day of the trip, depending on what part of the country you visit. For example, the per diem meal percentage for Birmingham, AL is $44; for San Francisco, it ' s $64 ( as of 9 / 30 / 08 ).

To find the per diem amounts for every state, go to: http: / / www. irs. gov / publications / p1542 / ar02. html

EXCEPTION #3: The $75 Dollar Rule Here ' s further easy way to avoid the hassle of saving receipts - - this one involves your business meal and hop expenses. Take it it or not, the IRS does not desire a acceptance when your business meal or coming-out monetary worth is less than $75 per amount.

Sound too good to be true? Well, there is a " grasp ", of sally: you standstill must maintain a log of the nearest five facts jibing to the deductible incident:

1 ) WHO did you eat with or strike? i. e. the names of the people and the essentiality of their business relationship to you

2 ) WHEN did the entertainment arise? i. e. the date

3 ) WHERE did the entertainment arise? i. e. the name of the restaurant or other venue

4 ) WHY did you meet? i. e. a description of the business purpose of the meal or event

5 ) HOW MUCH did you spend? i. e. the dollar amount

You should document these five facts in a log. Your daily appointment book or day - digital watch is the perfect joint to jot this down in less than a minute. Having met the IRS verification requirements, you can then pitch away the receipt. In the crisis of an report, you ' ll be covered.

Two final comments: Exception #2 applies to overnight travel situations, regardless of whether you eat your meals alone or with business associates. Exception #3 applies to meals and entertainment expenses incurred when you are with someone with whom you have an existing or coming up business relationship, regardless of whether you are in town or in overnight travel station.