By
Balance Pro Staff
posted on
August 23, 2022
You've heard that you should deduct your business expenses, but why? How do writing off business expenses help me save money? This article explores examples using realistic numbers to help you understand how deducting business expenses can help put money back in your pocket.
David is a small business owner who earned $81,000 in 2021. His self-employment tax is $12,393, and his income tax is $10,807. David kept track of his business expenses which equal to $2,100. These expenses count as tax deductions and reduce his net self employment income to $78,900. Now, with $78,900 in taxable self employment income, he pays $12,072 in self-employment tax and $10,345 in income tax. Adding the business expenses saved David over $780 in taxes.
Sonya is a self-employed freelance web designer who earned $62,500 in 2021. Her self-employment tax is $9,563, and her income tax is $6,737. Luckily, Sonya kept track of her business expenses which equal to $5,700. These expenses count as tax deductions and reduce her net self employment income to $56,800. Now, with $56,800 in taxable self employment income, she pays $8,690 in self-employment tax and $5,483 in income tax. Adding the business expenses saved Sonya over $2,100 in taxes.
Julie is an elementary school teacher that uses her own money to buy classroom supplies. As a teacher, Julie can write off up to $250 each year for any expenses on school supplies according to the IRS.
This post is for informational uses only and is not legal, business, or tax advice. Please consult with an attorney, business advisor, or accountant with concepts and ideas referenced in this post. Balance Pro assumes no liability for actions taken in reliance upon the information contained in this article.
Retrieving Uber receipts may not be immediately apparent to all users. In this blog post, we will guide you through the step-by-step process of retrieving your Uber receipts using the Uber app and website
PayPal's transfer limits are in place to protect users and their PayPal balances, and they serve as a security measure to prevent unauthorized or erroneous transfers. Learn more about PayPal limits in this article.
Consider all of the receipts you've accumulated this year. Do you have a strategy for organizing all those receipts? When you get to the end of the year and feel the pressure to have your taxes done, you’ll wish you kept track and organized your receipts.
In this article, we'll explore the different options available for receipt scanning and delve into the reasons why this technology has become so popular. Most importantly, we'll take a look at the benefits of using a receipt scanner app.
Bookkeeping relies on debits and credits to ensure that a company's financial records are balanced. Debits are used to increase asset or expense accounts, while decreasing liability, revenue or equity accounts. Credits do the opposite.
Purchasing a new car is a major financial investment, especially if you plan to use it for both personal and business purposes. Fortunately, the IRS recognizes this and has created specific rules for tax deductions on cars purchased for work-related purposes.
Receipts are proof of a sales transactions and it is important that you hang on to these receipts just in case you need to provide proof to the IRS or other entities, customers, etc.
There are numerous ways to aid those in need during these difficult times, whether you have already donated to charity or are contemplating doing so. However, you may have questions regarding which charitable donations are eligible for tax deductions.
Balance Pro makes it easy to track your personal finances, so you always know where your money is going.
Sign Up for Free No credit card required.