But with a little planning and organization and a great tax professional, you can take advantage of tax deductions and other strategies that will legally and ethically allow you to keep more money in your pocket. In fact, most businesses work off a list of only 25 to 50 business deductions, when in reality there are more than 300 deductions available to any business owner.
We write a lot of blogs abut increasing your income and decreasing expenses, but now, we’ll cover some great tax strategies for any chiropractor to keep more. This is only part one of a three-part series with tax tips, so stay tuned.
It’s important to note that this is general advice to keep you informed and not to be construed as law of professional tax advice for your situation. Hopefully, this will get you thinking so you can go visit your CPA or tax strategist with a list of questions in hand. Always consult a professional tax advisor and don’t wait for the last minute!
Ten tax deductions chiropractors should be aware of:
1. Office lease
For most practices, the cost of the monthly lease is one of the biggest expenses they incur. The good news is that rent and lease payments for commercial space can be deducted come tax time. To take advantage of additional end of the year deductions, chiropractors can even make their January of first quarter lease payments in December (depending on what accounting method you employ).
2. Marketing expenses
The lion’s share of your marketing, advertising, and promotional costs can all be deducted. Whether it’s newspaper ads, social media campaigns, fliers, business cards and print materials, domain names, paid online ads, or your website design and maintenance, tally up everything you do to try and bring in new patients and submit it to your CPA for consideration.
3. Events and parties
Hosting a client appreciation night or open house? Throwing another great holiday party for the office? Remember that expenses for those shindigs are all part of running your business – and therefore legitimately tax deductible.
4. Put your children on the payroll
Do your children sometimes come in and help you clean your office, file some paper work, or go along on business errands with you? According to the U.S. Supreme Court, children are old enough to start performing simple clerical duties at age seven, so why not hire them and make it official? Depending on how old they are and what you feel is appropriate, give them a list of duties around the office just like they have chores at home, and their earnings will be tax deductible, and possibly some bigger costs of parenting if they are written into the business.
5. Office equipment
Stop and look around your office – everything you purchased for your business can be tax deductible, including furniture, plants, magazines for the waiting room, the Internet router, copy machine, and posters on the wall. Take careful inventory and match them up with receipts. There are even ways to rent big equipment back to your own corporation for bigger tax breaks!
If you attend any professional seminars, speeches, or invest in your own education in any way (except investment seminars), you can probably write off the costs you incurred, including registration and also travel expenses. Take note that this doesn’t just have to be about chiropractic or even your practice, but any education!
7. Books, tapes, and podcasts
Likewise, if you buy books, magazines, journals, podcasts, or the like that could reasonably improve your knowledge or skill as a chiropractor, you have yet another deduction to take advantage of.
Have a chat with your tax advisor about incorporating your practice. The laws and benefits may vary depending on your state, but incorporating a business as a Professional Corporation is a great way to garner tax breaks and also reduce personal liability. Once you incorporate, there will be myriad new tax deductions and most importantly, strategies for your tax preparer to employ to your advantage.
9. State and federal tax credits
Most people (including a lot of standard tax preparers!) don’t realize that there are numerous tax credits available to business owners, including employment credits, research and development credits, new hire credits, work opportunity credits, and others. Of course a business needs to qualify and each state varies (although not federal) – but if you manage to jump through the correct hoops and structure your business accordingly, the tax savings could be huge. For an example of a great firm that specializes in federal and California tax credits, check out Carrazco Innovative Tax Solutions at www.Carrazco.com
If you take clients out to lunch, dinner, or for social meetings where you discuss business, you have a write-off. In fact, you can take a 50 percent deduction for meals and a 100 percent deduction for other entertainment costs when you are doing business. You can even take an employee, fellow chiropractor, referral partner, or potential investor out for food and entertainment, as long as you discuss business. If you and your spouse entertain at home and discuss business, those costs are deductible, as well.
It gets even better – if you or you and your spouse have a business meeting with a potential client, investor, or fellow chiropractor, and then directly after you do something fun like a sporting event, movie, go out for dessert, or some other form of entertainment, that can be deducted as well.
Stay tuned for ten more tax deductions chiropractors should be aware of in Part Two of this blog, and then general tax tips in Part Three.