10 of the Most Common Write-Offs for Online Business Owners
10 of the Most Common Write-Offs for Online Business Owners
+ What the heck is a write-off
Schitt’s Creek – I love you. Not only for your immaculate sense of humor, but for bringing to light a very confusing topic for entrepreneurs and small business owners: write-offs.
If you haven’t seen the show, there is a scene in which David, a new entrepreneur, buys bedding and a lamp because he wants to test the quality so he can sell at his store.
David’s dad, who is aware of David’s poor financial situation and has been actively encouraging him to save money, asks David who is going to pay for the new items.
David says, “It’s a write-off. It’s when you buy something for your business and the government pays you back for it.”
David’s dad says, “Oh, and who pays for it?”
And David says, “Nobody. You write it off.”
This scene so so accurately depicts the misunderstanding of write-offs!
Here’s what a write-off is: An expense (something you paid for) that is used for business. When a small business incurs certain expenses that are considered necessary and ordinary for the operation of the business, these expenses can be deducted from the business’s revenue, which reduces your profit and therefore your taxable income.
The short version: Writing off allowable business expenses reduces the amount you owe in taxes. It DOES NOT mean that it is free.
Let’s walk through an example.
You are a Social Media Manager and bought business cards to hand out advertising your business. This is considered an advertising and marketing expense and is 100% allowable as a business expense!
Cost of the business cards: $129.99
Revenue that month: $3,000
*For the sake of this example, we are going to say that you are paying 25% of your profit in taxes.
You’ll notice that the difference between the two examples is $32, while the cost of the business cards is $129.99. In the write-off example, you’ll pay $847.49 ($717.50 for taxes + $129.99 for the biz cards) that month, vs $750 if you didn’t buy the business cards.
This is exactly why we at the Easterday Group recommend that you take advantage of write-offs. If you NEED something for your business, you should write-off the cost to maximize your deductions. But you should NOT just buy unnecessary things for your biz because they’re not free.
10 of the most common write-offs for online business owners (plus examples!):
1. Advertising + Marketing
Website subscriptions, business cards, photoshoots, email marketing subscriptions
2. Software
Project Management software, CRM (Honeybook, Dubsado, etc), Zoom, Adobe, QuickBooks, Calendly
3. Office Supplies
Pens and notebooks, desk organizers, laptop stands
4. Contractors
Virtual Assistants, Social Media Managers, OBMs, Photo Editors
5. Legal + Professional
Accountants, Lawyers. Contract Templates
6. Meals
BUSINESS meals with a client or team member (only 50% of the meal can be deducted)
7. Bank + Credit Card Fees
Processing fees from Honeybook, Stripe, Intuit or Stripe
8. Insurance
Business insurance! If you don’t have it, I’d recommend it!
9. Professional Development
Coaches, business books, masterminds, webinars, courses, conferences
10. Travel
BUSINESS travel for a photoshoot, to meet a client, for a conference, etc. Cost of airfare, lodging, meals, and transportation can be written off while on business trips
With all expenses, don’t forget to SAVE THOSE RECEIPTS. I recommend using Google Drive, Dropbox, or saving the receipt directly to the QuickBooks charge if you have the QB app.
