While we all know that there are certain tax deductions we can take if we have the receipts to back them up, did you know that there are some tax breaks you can take without receipts? That's right—no need to rummage through old shoeboxes or file cabinets full of paperwork. This post will show you common small business deductions you can claim, even if you don't have documentation.
Note that you should keep receipts for all business expenses you want to deduct whenever possible. If an IRS auditor comes knocking, having that documentation will make the audit process go much more smoothly.
However, there are specific types of deductions you can safely claim without a receipt.
Keep in mind that it's always a good idea to speak with an accountant or tax specialist to find out what deductions are available to you, as not everyone is eligible for each deduction.
If you're self-employed, you're responsible for paying your own Medicare and Social Security taxes, also known as self-employment taxes. This lets you deduct half of those taxes from your income, lowering your federal income tax bill.
If you use tax software to prepare your return, the software will automatically calculate the amount to deduct.
If you have a home-based business, you may be able to deduct a portion of your rent or mortgage, utilities, insurance, and other home-related expenses under the home office deduction. The key here is that you must use your home office exclusively for business purposes; a dedicated room isn't required, but the space must not serve any other purpose.
You don't need receipts for most home office expenses, but you should have other documentation, such as:
If you're self-employed and have health insurance, you can deduct the cost of your premiums from your taxes. This deduction is available even if you don't claim itemized deductions on Schedule A.
If you don't have receipts, use a copy of your policy's declarations page or download your payment history from your insurance company's website.
Contributing to a qualifying retirement plan like a traditional IRA, SEP-IRA, or solo 401(k) is not only good for your future—it's also good for lowering your tax bill in the present. The amount you can deduct will depend on the type of retirement plan you have, but regardless, it's worth taking advantage of this deduction if you can.
The institution that manages your account should report all contributions made to the account during the year on Form 5498. You may also be able to find the information on your year-end statement.
If you use your personal vehicle for work-related purposes, you can deduct the cost of gas, repairs, and depreciation. However, there's a simpler way to do this than collecting receipts and calculating all those costs individually: using the standard mileage rate.
The standard mileage rate is a set amount per mile that you can deduct for business use of your vehicle. In 2022, that rate is 58.5 cents per mile for January through June and 62.5 cents per mile for July through December.
There are a few things to keep in mind when using the standard mileage rate:
People often miss expenses like these come tax time because they think they need receipts—but now that you know better, hopefully, you won't miss them anymore!
Business owners who use a cell phone for business purposes can deduct a portion of the cost of their service plan.
To calculate your deduction, multiply the cost of your monthly service plan by the percentage you use for business —somewhere between 30% to 50% is typical.
The rules for income tax write-offs vary by business type or entity.
For example, self-employed taxpayers can deduct their health insurance premiums. However, businesses structured as S corporations can deduct these premiums on the business tax return, while owners of other pass-through businesses deduct these expenses on Schedule 1, which gets filed with their Form 1040.
Additionally, owners of S corporations can't take the home office deduction. If you have a home office you use for business, you can have the company pay you rent for the home office, but those rent payments are taxable income on your individual tax return.
You also have the option of reimbursing yourself for the cost of maintaining your home office under an "accountable" plan. However, this strategy requires a written plan documenting what expenses are allowable, completing monthly expense reports, and submitting receipts for any expenses you plan to reimburse.
If you want to create an accountable plan for your S corporation, it's a good idea to discuss the requirements with your CPA to ensure you're handling things correctly.
Bank and credit card statements can provide some documentation for tax credits and deductions, but they're usually not sufficient on their own. These statements don't show all the details that the IRS requires:
For example, your bank statement might show that you spent $135 at Costco on December 1. But an IRS auditor can't tell from the bank statement whether you purchased office supplies or groceries for home.
If you don't have receipts, keep as much alternative documentation as possible to support your tax deductions. Some examples include:
Tax season doesn't have to be such a pain after all! By being aware of some common deductions that don't require receipts, you can ease some of the burden (and maybe even get a bigger tax refund in the process).
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