If you have an online business that you profit from make sure that, you keep track of your expenses that can be deducted on your tax return. If you fall into the online business tax filer category and file a Schedule C, today we are covering some online business expenses that you should remember to deduct when filing taxes.
Amazon.com or ebay seller deductions
If you sell, services or items on Amazon.com or eBay you have to pay commissions to the companies. The good news is you can deduct the money you pay them in commissions on your commission expenses line on the Schedule C. Additionally; you probably have to pay for shipping to. You can also deduct your delivery and postage fees since it is required to conduct your online business.
It would be deducted as an “other expenses” yet you would write in Postage and Delivery in Part V of Form Schedule C. Also, make sure that you do not forget to add in the cost of box and packing supplies for your packages that you send to customers. These expenses fall under the “Office Expense” and you can deduct them on Schedule C too.
Lastly, if you are an eBay seller you probably are paid via PayPal, which you have to pay a fee to out of every transaction. This is a Merchant Account Fee and you can write off the fees that add up over the year as “other costs”.
Blog and website deductions
If you own a blog or website, you are bound to have some expenses that come with website building and maintenance. For example, your domain and hosting fees can be deducted. Additionally, if you use an email service such as MailChimp you can deduct those fees too. If you have a shopping cart service that is another tax write off.
When writing off your domain and hosting they fall under the category other expenses because they are “Computer and Internet Expenses”. If you have to use online media storage that comes with fees, you would place those fees under the same category.
Your email service fees could go under other expenses or they may fall under advertising expenses, it just depends on the reasons you use it. Other advertising expenses would be Facebook Ads and Google Adwords.
Lastly, the shopping cart service would fall under a Merchant Account Fee, as PayPal, so you would put this under Cost of Goods Sold, since you have to have it to sell your goods.
Home office deduction
Everyone may think that since they have a website or small business that they operate from their residence that they qualify for the Home Office Deduction. However, this is not always the case because two requirements have to be met.
First, the area that you are trying to deduct must be exclusively and frequently used for conducting business, such as your spare bedroom. Second, it has to be a principal place of business. This means you must operate your business from your home substantially and regularly in order to be eligible for the Home Office Deduction.
In order to get the Home Office Deduction a specific area in your home has to be used frequently and solely for business. For example, if you have a room that you restrict to only office work and it contains a computer it is consider your home office.
However, if your computer is in your family room and your family is there in addition to you working, you do not qualify for the Home Office Deduction. Sometimes taxpayers are not able to qualify for this deduction simply because they use their computer for other things. If this is the case, it may be worth investing in a computer that you use for business purposes only.
Additionally, the room that you are considering your home office should also be the place where you take care of all of your administrative and managerial work, such as ordering supplies, meeting clients, billing, and bookkeeping.
The most important thing about everything that has been discussed today is organization. In order to make sure that you are able to get all of your deductions you need to make sure that your receipts and other records are organized so you can file your taxes effortlessly when it comes time to do so. You do not want to wait until the last minute to start trying to locate everything. You have to have an organization system in place from January.
You may want to consider using an online program such as TurboTax to file your small business taxes. Their system makes it possible for many small business owners to file their own taxes and save on tax preparation fees in the process.