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"Strategies to 'Up' Your Deductions"

by Bernice Ross, Ph.D., MCC and Byron Van Arsdale, MCC

Reflecting upon your tax return -- did you make the most of your deductions? Would your tax return be able to withstand the scrutiny of a full IRS audit? Before you file your next 1040, check to make sure you've taken every allowable deduction and that each deduction has been properly documented. Depending on your tax rate, every dollar you deduct pays you 15-55 cents. To see how effective you were, compare your Schedule C against the list below. (Remember, always verify all deductions with your accountant.)

1. Did you deduct your mileage driving to and from the office? (This is NOT deductible, because it's considered commuting.) Change commuting to a deductible activity by driving by FSBOs, stopping to refill the brochure boxes, or previewing property before going to the office.

2. Did you use your appointment book, Palm Pilot, or computer to log when you met with clients? Did you also log the number of miles driven as well as how much you spent on lunches or snacks for buyers? In an audit, this will be "proof" of your activities.

3. The IRS limits "gifts" to $25.00 per person. Thus, for a four-person family you can legally give a house-warming gift up to $100.00. If you would like to "give more," consider "giving" a home warranty to your buyer/seller. You can legally credit part of your commission at close to the seller or buyer to pay for the home warranty. The one catch, however, is that you must disclose the credit in writing to all parties including the lender. (Avoid offering "referral fees" since in most states, "referral fees" may only be paid to licensed agents/brokers.).

4. Did you deduct for petty cash items like pens, pencils, keys, notepaper, hammer, tape, stamps, etc.? The IRS accepts "cash" write-offs up to $25.00 if you have a receipt or note the cash amount in your appointment book by date and amount.

5. Are you depreciating your car, computer, printer, and other large items you use in your business?

6. Did you deduct car washes/polish (or supplies you use to clean your car yourself)?

7. The IRS only allows a 50% deduction for entertainment. Instead of taking clients out to lunch or dinner, hold a client appreciation event (such as a party or open house) and take the deduction under advertising and promotion. You can also do the same thing for broker open houses.

8. Did you also deduct the expenses for your ISP (AOL, Earthlink, etc.), computer software, as well as any web hosting/design fees you paid?

9. Did you deduct your auto expenses including gas, insurance, repairs, license fees, smog inspections, etc. based upon the percentage of total business miles you put on your car?

10. Did you deduct for your open house refreshments you serve each week?

11. Did you volunteer your time for a charitable organization? Check with your CPA to see if you can take a cash deduction for the time you volunteered.

12. Did you deduct part of your home phone expense provided you used your home phone for business?

13. Did you deduct your education expenses including your mileage to and from any educational events?

14. Did you deduct any design fees you incurred in creating your web site?

15. Did you deduct the cost of any marketing materials including postcards, brochures, etc. as well as mailing costs?

16. Did you deduct the cost of your film, your digital camera, or any other costs you incurred in posting pictures to your web site?

17. Did you deduct for keys, lock boxes, valet parking, meter parking, and other miscellaneous expenses?

18. Did you record the name, purpose, and date of each entertainment expense on your cash or credit card receipt?

Remember, the key is to keep accurate records by noting the client, the date, and purpose on your receipts. Also, always check with your CPA to verify your deductions meet current IRS guidelines. And, if you didn't keep great records last year, today's a great day to begin!