Ready for a tax-mazing fact? There are more items deducted as Supplies on Schedule C Line 22 than anywhere else on the return. This tax-fastic observation often comes as a surprise to business owners and taxation students. Many purchases assumed deductible elsewhere (because, well… it just makes sense) are Supplies deducted on Line 22. How many business owners are aware of this fact? Few. How many goof up their tax returns as a result? A lot!
In this article, drawn from our Real Estate Agent Tax-Cut Library, we’ll straighten out this common misconception by sharing the IRS definition of supplies as it applies to Schedule C. Then, we’ll add an exhaustive, but not inclusive, list of items deducted on Line 22 (which will then be immediately qualified by items not deductible as Supplies).
What are Supplies? The IRS definition of Supplies is not found in the instructions of Schedule C (hence the confusion?). But, never the less, Supplies are items purchased and consumed for business; stuff that gets used up and replaced as you get things done. Many procurements that resemble office expenses are deducted as Supplies, as are a few promotional purchases. Here’s a brief list of commonly deducted Supplies:
Items that are Not Supplies: Now that we’ve shared the logic of what constitutes a deductible, let’s turn the tables and share a handsome handful of supply-like expenses that get elsewhere on Schedule C:
When Can You Deduct Office Supplies? For the most part, incidental supplies are deductible in the year of purchase. Stocking up near year’s end is also deductible if 1) You do not track supplies as they get consumed, 2) The purchases are reasonable given the nature of your business, and 3) Your business does not inventory such items at the beginning or end of the year.
Maxing the Supplies Deduction: Supplies include many small, easily overlooked or forgotten purchases that add up quickly. Remember: Every $100 worth of deductions saves the average Real Estate Agent over $30! Overlooking these expenses is a tax-costing shame. To maximize your tax savings, follow these cost-tracking tips.
A Word of Warning: As we near the end of this article, let’s discuss a couple of situations to steer clear of:
Take Away: Items that are regularly consumed by your business are supplies. Supplies include a wide variety of costs that include some promotion and office-related expenses. They are generally deductible in the year of purchase (if within reason). Supply costs add up quickly and are easy to overlook. Follow the tips highlighted above to ensure you get every deduction to which you are entitled.
Summary and Invite: We hope this article has helped you better understand the deductibility of Supplies on Schedule C. If you’d like to learn more about cutting your highest cost: TAXES, check out our Real Estate Agent Tax-Cut Library. The Real Estate Agent Tax-Cut Library includes over eight hours of video broken into twenty-nine searchable volumes and covers every possible deduction a Real Estate Agent can take on their tax return. Our Broker Version will help your entire agency cut their taxes! We also invite you to browse our courses.
All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.
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