top 5 llc write-offs now there could be a number of reasons why you decided to start a llc. Maybe you're a new business owner, maybe you just started earning 1099 income and someone told you you needed some type of entity structure, maybe you're a truck driver, maybe you even want to invest in a rental property and you want to get a llc for asset protection.
Startup costs and organizational costs could include marketing and advertising, perhaps you've already established your website, or perhaps you spent money on training and coaching before deciding to start your business.
Any costs you incur before you're considered operational are considered startup costs and operation costs, and you as a business owner are liable for them. Let's imagine you spent more than $5,000 to set up your firm.
Any expense that over \$5,000 is amortized over 180 months, so as a business owner, you still get to profit from part of those \$5,000 costs. Number two, the home office deduction In the year 2020, we were faced with a pandemic, and if you're watching this video right now, chances are you lived through it, so let's talk a little bit more about the tax deductibility.
Most small business owners work from home, so how do we take advantage of the home office deduction? Simply put, if you have a specific space in your home or a specified area in your home where you do business that is solely for business, you can use that area as a home office deduction.
Here's how it works: first, determine the square footage of your home office space or home office. Once you have that information, divide your home office space or home office into sections. When you do this calculation, you will get a percentage of the total square footage of your entire home.
This percentage will be your home office percentage based on the utilities that you have in your home utilities could include your water cable electricity and gas fill these all go into your home office expenses whenever you make repairs, maintenance, or improvements to your home office these can also go down as a part of your home office expense.
Number three, the vehicle deduction, is another way for business owners to benefit from some of the changes they plan on making in their home as part of their home office. As a business owner, you may need to travel to meet with clients, and your vehicle will almost certainly be used for that purpose.
How do we ensure that the vehicle that is utilized for your business is properly leveraged? There are two ways to decide to take a vehicle deduction inside of your llc. One way is to take the mileage. If you are a business owner, you will be able to take 58 cents per mile you drive in 2020. For many uber, lyft, and truck drivers, mileage is extremely important because they track their mileage on various different apps called mil. For every mile you drive, you'll be charged 58 cents, which can quickly add up.
The second way for a business owner to take a vehicle deduction is to depreciate their vehicle within their business. A vehicle depreciates over the course of five years, so if you buy a car for $50,000, you'll get a $10,000 write-off each year if you use a straight line depreciation method. There are various methods for depreciating a car that you can use.
There's also code section 179, which allows you to take a business deduction for a vehicle that weighs over 6,000 pounds in a single year, so if you buy a vehicle that weighs over 6,000 pounds, you can ride off the entire vehicle in your business through your llc in the same year, lowering your taxes right away. Now let's talk about marketing and advertising. No business can function without consumers coming in the door. If you're in business, whether you're selling services or products, you'll need to promote and advertise those services and items. When you have marketing and advertising going out, whether it's flyers, websites, or seo, this is a business expense that you get to deduct every year through your llc.
These expenses do not have to be amortized or depreciated over time, thus instead of depreciating marketing and advertising over five years, you can write them off in the same year that you spend the money on them, as long as they aren't deemed starting organizational expenditures. You will have no trouble deducting 100% of your marketing and advertising expenses through your llc, and number five, when your business grows to the point where the benefits outweigh the costs of switching your llc to an escort, you will avoid the 15.3% self-employment tax that many llcs and sole proprietors pay, not to mention you will be able to deduct 100% of your marketing and advertising expenses through your llc. One of the many advantages of being in a llc is that you can choose to tax yourself as a llc, a s corporation, or a c corporation. However, one of the advantages of taxing yourself as an s-corporation is that you can avoid the self-employment tax and take a payroll tax deduction as a shareholder.
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