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Surprising Year-End Tax Deductions for Dreamers

By Valerie Young
As 2010 comes to a rapid close, I suppose I should be writing an inspirational message about the New Year.

How about a little practical inspiration that can help your wallet?

Every January 1, I set aside time to reflect on my 2011 goals.

But the last week in December is when I make sure I’m taking advantage of every benefit of being self-employed I possibly can.

Benefits you may not be aware are available to you, too.

You see, in the wise words of my friend and Making a Living Without a Job author of Barbara Winter:

“The American tax system is set up to benefit the very wealthy and the self-employed.”

That may not surprise you, especially if you already have a business.

However if you haven’t started your business – no make that ESPECIALLY if you haven’t started a business – there are some important tax facts that may surprise you.

SURPRISING TAX FACT #1: You have to have already started making money to take a deduction

This first one always comes as a surprise to people who haven’t yet launched a business…

Even if you don’t earn a dime until next year – or even the next 3 years — you can still write off legitimate business expenses you had in 2010.

It’s true.

As far as the United States Internal Revenue Service is concerned, as long as you are making what they call a “good faith effort” to earn a profit in the future – you can begin deducting any money you invest in building your business right away.

SURPRISING TAX FACT #2: Home or Away – as Long as You’re Working it’s Deductible

You probably already know about deductions for things like office supplies, books, and magazine subscriptions.

However, when your investment is intended to generate a profit, you may be able to deduct other things.

If you work from home, you can deduct a portion of your rent or mortgage and utilities. Even certain home repair expenses – like a portion of the cost of the new roof I put on or, in some cases, things like landscaping or snow plowing.

It gets even better.

If you take a 7 day vacation to the Caribbean or Florida or London and while you’re there you spend a day calling on local businesses or perhaps scouting out future seminar locales, your expenses for that day should be deductible.

For the last few summers my company (that would be me!) sends me to a lake in New Hampshire for a week to write. I deduct the mileage to and from the lake and groceries to keep me happily full as I work on my laptop from the deck.

SURPRISING TAX FACT #3: Learning is tax deductible!

You may not yet know “how” to make money doing your own thing…

But did you know that your investment in LEARNING how qualifies as a legitimate business expense?

After all, what could be more proof of your intention to succeed then investing in education and training designed to launch you into your own profitable business.

Live Training and Events

If you pay for a live class or a conference in 2010 that isn’t happening until 2011 you can still deduct it now. For instance, if you want to start a business around your love for cooking, or dogs, or clowning check out:

Basic Business Skills

Maybe you already work for yourself but need to improve some more general business skills. You can deduct tuition fees for courses on:

  • Presentation skills: Communispond offers a great course that I took and later taught back when I was in corporate training days.
  • Sales training: My friend Carolyn Herfurth runs a sales bootcamp for people who hate to “sell” (next one starts next week but if you sign up today – it’s deductible this year)
  • Writing your own web site marketing copy There’s not a date set yet but you can sign up for notices about when Matthew Goldfarb is doing his weekend class again

Business Building Training

You can also deduct the full cost of any learn-from-home programs designed to help you start a business. Some of my favorites are:

Profiting From Your Passions®

Okay this part is blatant self-promotion, but just as an example, because the Profiting from Your Passion® Career Coach Training Program is a business launch program, it also qualifies as a tax deductible expense.

If the idea of getting paid to brainstorm interests you, there is another incentive to act on your dream this year.

Order by December 31st, and get up to $1,375 in savings and bonuses. This includes the opportunity to qualify for a private marketing session with me.

Deduct Travel Expenses Too

Even if the event itself is free, you can still enjoy some tax breaks. Last year I attended Entrepreneur magazine’s annual Growth Conference in Miami. This is me with keynote speaker Guerilla Marketing guru Jay Conrad Levinson.

Even though the conference is free, I was still able to deduct my travel expenses.

The 2011 conference is happening January 20th in Atlanta If you go I urge you to come prepared to pitch your business to the editors. (The line is long, but it moves fast and you’ll meet really neat people!)

Just book your airfare or pre-paid hotel reservations in 2010 and you can deduct these expenses this year.

Unfortunately I can’t make it this year because I’ll be gearing up for the $99 No Travel/No Brainer Work at What You Love Virtual Workshop happening January 22-23.

I’m still working out some details but if you would like advance notification when I do, click here.

No matter how your learning occurs, the point is it’s probably tax deductible, and if you pay in 2010, you can take the deduction before you take the course.

With any of these programs, even if the course materials don’t arrive until 2011 – as long as it’s on your credit card before December 31, 2010 – and it meets the “good faith” criteria, it’s considered a legitimate business expense.

BONUS FACT

If you want to be your own boss, you need to start thinking like a self-employed person.

I hope I’ve opened your eyes to ways you can realize the 2010 benefits of the American tax system before you’re even officially self-employed.

More importantly, if losing my Mom at the too young age of 61 taught me anything, it’s to not defer something as important as your dreams.

Time is ticking folks. Please don’t let this year end without taking at least one small step in 2010 to get you closer to where you want to be in 2011.

In the wise words of Audré Lorde:

“When I care to be powerful – to use my strengths in the service of my vision, then it becomes less and less important whether I am afraid.”

You can find lots of additional information on deductible expenses and other tax matters on the Self-Employment/Small Business section of the IRS web site at http://www.irs.gov/businesses/small/index.html.

My Canadian friends can check out http://sbinfocanada.about.com/od/taxinfo/Tax_Information.htm

If you live outside the US or Canada I encourage you to learn about possible the tax benefits for entrepreneurs in your country.

There are 4 comments. Add yours.

  1. Sara (Edwards) Spector

    Hi, Valerie and everyone: re the tax question for self-employed persons. Running your own business does not necessarily lessen your taxes. Part of the problem can be where one lives. My daughter and her husband have lived in Georgia running a small business for 16 years; although they love the area and their home, taxes are so high there, they have decided to move back to Florida. 48 cents of every dollar goes to taxes and business fees. (Yes, they work with a good tax accountant.) Georgia has a state income tax, NO homestead exemption and personal insurance is twice or more what it is in Florida…with the same company!! There are so many foreclosures there currently that getting financing or refinancing is very difficult. Schools are closing and police and fire services have been drastically cut. So, if anyone has plans to move and start a business, look carefully at the place you are going and investigate that state’s tax structure.

  2. That’s REALLY good advice Sara.

    There clearly are still taxes but the more expenses you have the less your income the less taxes you pay. My main message is if you are going to spend money a) invest in your education to grow/start a business and b) people don’t necesarily have to wait until they’ve earned a profit to start taking busines expense as tax deductions.

    Thanks for adding your insight 2 cents!

    Valerie

  3. Rhonda

    Thank you for the tax info.
    Opened my eyes to some misconceptions.
    Happy New Year to you!

  4. Glad to help Rhonda.

    I learned from my friend Barbara Winter that part of our job is to help people who want to be their own boss to start thinking like entrepreneurs!

    Valerie

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