Don't Miss Taking These Tax Deductions for 2009
By Jan Zobel, EA

As 2009 came to a close, Congress continued to debate further tax law changes even after approving several new tax bills during the year. Most of the provisions in the new bills affect personal, rather than business, deductions. It’s important to keep informed about any changes that could affect your business tax liability but don’t forget about the old stand-by business deductions, most of which haven’t changed.

Business Driving Expenses
To take the deduction for business driving expenses, you’ll need to know how many miles you drove for business during 2009. If you haven’t been keeping a log, take some time to re-create your deductible mileage by using your appointment book or electronic calendar as a reminder of the business stops you made. If you went to the same location on a regular basis, find out how many miles it is there and back (programs like MapQuest ™ can be helpful), and multiply that figure by the number of times you went. For business miles driven in 2009, the standard mileage rate is 55¢/mile. However, see information below about bonus depreciation as this temporary tax law change may make it more beneficial for you to deduct your actual vehicle expenses (gas, repairs, depreciation, etc.) rather than claiming the standard per mile rate.

Home Office Deduction
Your home office is still deductible if you have a space (not necessarily a separate room) that is used exclusively for your business. In addition, the home office must be the place you meet with clients and customers, store inventory, or do the administrative work for your business. If you qualify for the deduction, you’ll be able to claim a portion of such expenses as mortgage interest or rent, utilities (including garbage), insurance, repairs, etc.


Even if you can’t claim a home office, you can still deduct telephone expenses. If you have only one phone line in your home, you can’t deduct any of the monthly service charges, but you can take the cost of individual business calls. If you have a second phone line or a cell phone, you can deduct the monthly charges to the extent that line was used for business.

Equipment and Furniture Purchases
These items can either be expensed (deducted) in full in the year of purchase (up to $250,000 of purchases can be treated this way on your 2009 return) or be depreciated (deducted) over the IRS’ mandated 5 or 7 years. Bonus depreciation, which was new in 2008, has been extended to 2009 and allows an extra 50% of the cost of the item to be depreciated in the first year it’s used in your business. This can be especially beneficial for passenger vehicles used in a business as, without the bonus amount, depreciation on them would be limited to less than $4,000 in the first year. Since depreciation can be calculated several different ways, if you prepare your own tax return, it may be helpful to consult with a tax professional regarding the most beneficial way to handle this portion of your return.
No matter which depreciation method is used, the full cost of all equipment and other business expenses that are charged by December 31st can be deducted on your 2009 tax return, even though you won’t be paying the charge card bill until 2010. This is true also for items such as a car on which a loan is being paid off over time.

Interest
The Interest you pay on your charge card or business loan can also be deducted on your tax return. If you use one charge card exclusively for business, those finance charges are 100% deductible. If your card is used for both business and personal expenses, you’ll need to prorate the interest you paid.

Business Travel and Meals
Business travel (hotels, planes, etc.) is another deductible expense and 100% of the cost can be claimed. Meals on these trips are, however, like other business meals, only 50% deductible. Travel meals can be deducted either based on their true cost or on a standardized per diem amount that varies from city to city. IRS Publication 1542 lists the per diem rates for each U.S. city. Compare that amount to the total of your meal receipts to see which method is more beneficial for you.

The time you spend looking at your taxes and considering deductions before year end is valuable time spent. Keeping good records and being aware of the deductions available to you will go a long ways towards reducing your tax liability.
Additional Tip: To stay on top of future changes in tax law that might affect you, check the IRS’ small business web site at www.irs.gov/businesses/small/index.html. HBM

© Jan Zobel 2009. Jan Zobel, EA is a San Francisco tax professional (enrolled agent) who, for 30 years, has specialized in working with self-employed people. For a list of deductible business expenses, go to her website www.JanZtax.com. Jan is the author of Minding Her Own Business: The Self-Employed Woman’s Guide to Taxes and Recordkeeping (SourceBooks).

Previously published on page 48 in the December 2009 issue of HOME BUSINESS® Magazine, an international publication for the growing and dynamic home-based market. Available on newsstands, in bookstores and chain stores, and via subscriptions ($19.00 for 1 year, six issues). Visit www.homebusinessmag.com

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