Introduction

1. Tax Deduction Basics

• How Tax Deductions Work
• The Value of a Tax Deduction
• What Professionals Can Deduct
• Professionals Who Lose Money
• Annual Dollar Limit on NOL Deductions

2. Choice of Business Entity

• Types of Business Entities
• Limiting Your Liability
• The Four Ways Business Entities Are Taxed
• Comparing Tax Treatments
• Should You Change Your Business Entity or Tax Treatment?

3. Operating Expenses

• Requirements for Deducting Operating Expenses
• Operating Expenses That Are Not Deductible
• Tax Reporting

4. The Pass-Through Tax Deduction

• You Must Have a Pass-Through Business
• You Must Have Qualified Business Income
• You Must Have Taxable Income
• Deduction for Taxable Income Up to $163,300 ($326,600 if Married)
• Deduction for Income Above $163,300 ($326,600 if Married)
• Taking the Pass-Through Deduction
• Strategies to Maximize the Pass-Through Deduction

5. Car and Local Travel Expenses

• Deductible Local Transportation Expenses
• The Standard Mileage Rate
• The Actual Expense Method
• Other Local Transportation Expenses
• Reporting Transportation Expenses on Schedule C
• When Clients Reimburse You
• Professionals With Business Entities

6. Long Distance Travel Expenses

• What Is Business Travel?
• What Travel Expenses Are Deductible
• How Much You Can Deduct
• Maximizing Your Business Travel Deductions
• Travel Expenses Reimbursed by Clients

7. The Home Office Deduction

• Qualifying for the Home Office Deduction
• Calculating the Home Office Deduction
• Simplified Home Office Deduction Method
• How to Deduct Home Office Expenses

8. Deductions for Outside Offices

• If You Rent Your Office
• If You Own Your Office
• If You Lease a Building to Your Practice

9. Deducting Long-Term Assets

• What is a Long-Term Asset
• Special Rules for Deducting Inexpensive Property
• Deducting Long-Term Personal Property: Bonus Depreciation, Section 179, Regular Depreciation
• Bonus Depreciation
• Section 179 Expensing
• Deducting Repairs and Improvements
• Regular Depreciation
• Deducting Real Property
• Intangible Assets
• Tax Reporting and Record Keeping
• Leasing Long-Term Assets

10. Start-Up Expenses

• What Are Start-Up Expenses?
• Starting a New Practice
• Buying an Existing Practice
• Expanding an Existing Practice
• When Does a Professional Practice Begin?
• How to Deduct Start-Up Expenses
• Organizational Expenses

11. Medical Expenses

• The Affordable Care Act (ACA)
• The Personal Deduction for Medical Expenses
• Self-Employed Health Insurance Deduction
• Deducting Health Insurance as an Employee Fringe Benefit
• Tax Credits for Employee Health Insurance
• Sick and Family Leave Tax Credits for the Self-Employed
• Adopting a Health Reimbursement Arrangement
• Health Savings Accounts

12. Inventory

• What Is Inventory?
• Deducting Inventory Costs

13. More Deductions

• Advertising
• Business Bad Debts
• Casualty Losses
• Charitable Contributions
• Clothing
• Disabled Access Tax Credit
• License Fees, Dues, and Subscriptions
• Education Expenses
• Entertainment and Meals
• Gifts
• Insurance for Your Practice
• Interest on Business Loans
• Legal and Professional Services
• Taxes

14. Hiring Employees and Independent Contractors

• Employees Versus Independent Contractors
• Tax Deductions for Employee Pay and Benefits
• Reimbursing Employees
• Employing Your Family
• Tax Deductions When You Hire Independent Contractors

15. Professionals Who Incorporate

• Automatic Employee Status
• Paying Yourself
• Employee Fringe Benefits
• Shareholder Loans

16. How You Pay Business Expenses

• Your Practice Pays
• Using Personal Funds to Pay for Business Expenses
• Your Client Reimburses You
• Accountable Plans

17. IRS Audits

• Anatomy of an Audit
• Tax Shelters, Scams, and Schemes

18. Record Keeping and Accounting

• Recording Your Expenses
• Your Accounting System
• Documenting Your Deductions
• Accounting Methods
• Tax Years

Index

Introduction

If you’re a professional, no one needs to tell you that taxes are one of your largest expenses. The best way to minimize your taxes and maximize your take-home income is to take advantage of every tax deduction available to you.

This book, the first of its kind, is about tax deductions for all types of professionals, including:

• accountants
• architects
• chiropractors
• consultants
• dentists
• doctors
• engineers
• lawyers
• marriage and family therapists
• optometrists
• pharmacists
• psychologists, and
• veterinarians.

Specially tailored for the unique needs of professionals, it shows you how you can deduct all or most of your business expenses from your federal taxes—everything from advertising to vehicle depreciation. It can be used by professionals who work by themselves, or by those involved in a group practice—whether you are a sole proprietor, or are involved in a professional corporation, a partnership, or an LLC.

Now more than ever you’ll need guidance when it comes to under-standing your taxes. In 2017, Congress enacted the most sweeping changes to the tax code in over 30 years when it passed the Tax Cuts and Jobs Act (TCJA), which took effect in 2018. Now, in an effort to stave off economic devastation in the wake of the coronavirus (COVID-19) pandemic, Congress has revised the nation’s tax laws yet again, temporarily suspending many of the harshest provisions of the TCJA. We explain how these changes affect business deductions for professionals including:

• new rules for deducting net operating losses during 2018 through 2020 (see Chapter 1)
• new tax credits for self-employed professionals impacted by the coronavirus (COVID-19) pandemic (see Chapter 11)
• rules for deducting business-related meals (see Chapter 13)
• changes affecting charitable contributions by businesses (see Chapter 13)
• new tax credits for employers who retain their payrolls and provide sick leave and family leave (see Chapter 14), and
• how employers can deduct pandemic-related payments to employees (see Chapter 14).

Even if you work with an accountant or another tax professional, you need to learn about tax deductions. No tax professional will ever know as much about your business as you do. The information in this book will help you provide your tax professional with better records, ask better questions, obtain better advice—and, just as importantly, evaluate the advice you get from tax professionals, websites, and other sources.

If you do your taxes yourself (as more and more small business owners are doing), your need for knowledge is even greater. Not even the most sophisticated tax preparation program can decide which tax deductions you should take or tell you whether you’ve overlooked a valuable deduction. This book can be your legal companion, providing practical advice and information so that you can rest assured that you are not paying more to the IRS than you need to.

●