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Deduction Outline

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by Matthew Abrams, CPA - January 31, 2024

 

HOW TO TAKE DEDUCTIONS FOR AUTO

 

Auto deductions used for business or work can be taken based on either the actual expenses of your auto or a flat rate of 56 cents per mile.  There are some important rules you need to follow before taking an auto deduction:

  • The auto must be driven from one office to another.  Driving from home to the office is considered commuting, which cannot be deducted.  However, if you have an office in your home, all business use of your auto can be deducted, since your home is considered your office.  A home office can be part of a room in your home, provided that that the designated office space is only used for business. See my separate article about deducting your home office.

 

  • You must keep a log of your business miles, and the log needs to be kept up throughout the year.  This is difficult to do, so I suggest using your appointment calendar to keep track of where you have driven, which makes it easy to figure out the mileage at a later date.  If you drive to the same work location each day, you can just keep track of the days you drive to your work location. You must have a log to compute your business mileage even if you deduct your actual expenses, because you need to prorate the auto expense by the percentage of business miles as a percent of your total mileage. 

Download MileIQ phone
mileage tracker app!!

Please call me with any questions of how to create your auto log or calculate your auto expenses.

 

HOW TO TAKE A DEDUCTION FOR YOUR HOME OFFICE

 

You can take a deduction for a home office for your job or business, provided that you need to have your home office to meet your job responsibilities.  It cannot be deducted simply if it is more convenient to work from home.  However, cell phones, the internet and lap tops tend to make our jobs somewhat 24/7, making the necessity of using a home office much more common place. 

 

A home office can be just part of a room in your house, provided that that designated space is only used for business.   The kitchen table that you also use for meals doesn’t qualify since it is partially used for personal use.  Storage in your house for business supplies can also be counted as your office.

 

The home office deduction is calculated by adding up all of your household expenses, including mortgage interest, taxes, utilities, repairs and maintenance, insurance, HOA fees, cleaning, alarm systems and landscaping.  These costs are then allocated to your home office based on the ratio of the square feet of your office and the total living space of your house.

 

 

DEDUCTING CELL PHONES, TELEPHONE, COMPUTER & INTERNET EXPENSES

 

 

Cell phones, telephones, computers and internet expenses can be deducted if they are used for business at least 50% of the time.  Your deduction must be reduced by the percent of personal use.  If you have only a residential telephone line, you cannot take a deduction for the phone line except for long distance telephone calls.  If you have a second residential phone, you can claim the business use of the second line.  A business phone line is always deductible based on the percent of business use.

 

 

DEDUCTING MEALS & ENTERTAINMENT

 

Meals and entertainment (T&E) are deductions that the IRS tends to scrutinize the most, should one actually be audited.  Years ago a former IRS agent once quipped that during tax audits, agents would say “half T&E and be home by three!”  I.E., agents would simply disallow half of your expenses, and go home early.

 

The tax law was changed to allow only 50% if your meals and entertainment expenses, provided the expenses meet the following strict rules:

 

  • They must be ordinary and necessary to conducting your business.

 

  • You must be taking a client with you, or expense of an office party or an office ceremony. E.g., going to lunch with another employee to discuss business is not deductible

 

  • If you are traveling out of town and you cannot return home overnight, you don’t need to be taking out a client.

 

  • You must write on the back of the receipt the name of the client and purpose of meeting.

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