In order to deduct use of your car, you need to know how many miles you’ve driven for business during 2008. If you haven’t been keeping a log, take some time to re-create your deductible mileage. Use your appointment book as a reminder of the business stops you made, and don’t forget trips to the office supply store or post office. If you went to the same location on a regular basis, find out how many miles it is to get there and back (programs like MapQuest ™ can help figure the mileage amount) and multiply that figure by the number of times you went. For miles driven between January and June, the standard mileage rate for 2008 is 50.5¢/mile. Miles driven between July and December are deductible at 58.5¢/mile.

 

You’ll have additional allowable mileage if you qualify for the office-in-home deduction, because the mileage for each business trip in which you leave or return to your home office can be included.

 

Home Office Deduction

In order to qualify for the home office deduction, you must 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, gather together information about the amounts you paid for mortgage interest or rent, utilities (including garbage), insurance, repairs, etc.

 

Telephone Expenses

Even if you can’t claim a home office, you can 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. Review your phone bills and circle the deductible 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

You can choose to either expense the cost of equipment and furniture purchases all in the year of purchase (up to $250,000 of major purchases can be treated this way on your 2008 return) or to depreciate the cost over the IRS’ mandated 5 or 7 years.

One thing to keep in mind is that all equipment and business expenses that are charged by December 31^st can be deducted on your 2008 tax return, even though you won’t be paying the charge card bill until 2009.

 

Interest Paid on Your Charge Card

If you use one 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

Another task you can do now in preparation for April 15^th is to review your business travel. You can deduct the actual amount you spent for meals on these trips, or you can choose instead to take a standardized per diem amount. Get a copy of IRS Publication 1542 which 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.

 

Another Year-End Project

Adding up the amounts you’ve paid independent contractors and consultants during 2008 is another year-end project. If you’ve paid any of them $600 or more in 2008, you’ll need to give them a 1099 form by January 31, 2009. Now’s the time to make sure you have the name, address, and social security number of anyone for whom you’ll need to issue a 1099.

 

Contributing to a Retirement Account

The time you spend looking at your taxes before year end is valuable time spent. Now that December 31^st has passed, there is only one way you can reduce your 2008 taxes and that is to contribute to a retirement account. While some types of retirement accounts (i.e. SIMPLE, solo 401(k)) must be opened by December 31^st, you can contribute to all plans, including a SEP-IRA, anytime prior to April 15^th (or October 15^th if you’re on extension).

 

There’s no better time than now to review the current year and make sure you have the records that will provide tax deductions for you on April 15^th. HBM

© Jan Zobel 2008. 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 in the December 2008 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 ($15.00 for 1 year, six issues). Visit www.homebusinessmag.com