In part one of our Entrepreneur’s Guide to Tax Season series we covered many common questions about small business taxes. Here in part two I want to expand on several topics we didn’t fully explore, and share the practical systems and choices that transformed our own finances. Hearing expert advice is useful, but seeing how someone applies it day to day makes those ideas actionable.
If you haven’t tried TurboTax Live, many of the suggestions below point back to consulting a tax professional for the final details. When we started using tax experts through a platform that offers on-demand consultations, everything changed: we discovered missed deductions, identified smarter ways to classify our business, and adopted tools that keep bookkeeping tidy all year. Those changes removed the stress of tax season and often produced sizable savings.
Monthly Itemizing of Your Expenses
As your business grows, expenses grow too, and it’s easy to feel overwhelmed. The best defense is a simple monthly routine: pick one day each month—ours is usually within the first few days—to review the previous month’s expenses and categorize them. Recording expenses while they’re still fresh in your memory saves time and avoids the frantic digging that happens when you wait until the end of a quarter or year.
An important step we’re adding now is attaching receipts to each expense. Whether you do this monthly or continuously throughout the month, capturing receipts eliminates later headaches. QuickBooks Self-Employed supports receipt uploads tied to expense entries so documentation is stored with your records, ready if you ever need to substantiate a deduction.
Pro tip: QuickBooks Self-Employed integrates with tax preparation tools designed for self-employed filers, offering year-round income and expense tracking, mileage capture, and receipt storage. Those features can make filing much easier and ensure deductions are supported by records. If you want one-on-one help, consider connecting with a tax professional who can review your records and even file for you.
Tracking Your Mileage
Mileage tracking is one area many entrepreneurs underuse. I’ll admit I haven’t been perfect at this, but adopting a consistent method is easy and valuable. Two practical options:
- Manual: Keep a small notebook or a notes entry on your phone. Before and after business trips, jot down the odometer reading and the business purpose—client meeting, supply run, seminar—so you have an accurate log to transfer to your bookkeeping system.
- Automatic: Use a mileage tracking app that logs trips via GPS. QuickBooks Self-Employed includes an automatic mileage tracker that records trips and lets you mark which are for business. That information can be synced with your bookkeeping and imported into your tax return, saving time and improving accuracy.
Considerations When Buying a Home
If you’re applying for a mortgage, the way you report business deductions can affect how lenders view your income. We learned this firsthand: in the year we were securing a mortgage we intentionally reduced certain business deductions to show higher net income on our application. While that increased our tax bill for the year, it helped us qualify for a better loan and enabled a major long-term investment for our family.
This is a strategic decision and not right for every situation. Consult a tax professional and your mortgage advisor to determine whether it makes sense to temporarily adjust deduction timing when you’re planning a home purchase.
Home Office Deductions
Owning a home with a dedicated office gave us additional legitimate deductions. To claim home office expenses, measure the square footage of the space used exclusively for business and calculate what percentage of your total home that represents. Renovations or repairs that affect that business space—flooring, HVAC, roofing—can be deducted in proportion to the percentage of the home used for business.
Utilities, mortgage interest, depreciation, cleaning services, and similar expenses can also be allocated to your business based on that percentage. Additionally, furniture and equipment purchased specifically for the office—computers, desks, shelving, and other items used solely for business—are typically deductible. Keep clear records showing items are used for business and remain in the office.
S-Corp Election
Electing S-Corp treatment for our LLC was a major turning point. In simple terms, instead of paying self-employment tax on all business income, you pay it only on the reasonable salary you pay yourself, while additional profit distributions are not subject to self-employment tax. For businesses that generate significant profit beyond the owner’s salary, this can reduce overall tax liability.
S-Corp status adds complexity and isn’t appropriate for every business, so discuss your options with a tax professional to determine whether it could benefit your situation.
Adoption Tax Credit
Although not specific to entrepreneurs, the adoption tax credit is important for families navigating the costs of adoption. The credit can be claimed for qualified adoption expenses, but the timing depends on the type of adoption and how expenses are incurred. In our case, costs spread across multiple years meant we claimed part of the credit in one tax year and expected to claim the remainder in the year of finalization.
Rules vary for domestic, international, and special needs adoptions, so work with a tax expert to understand when and how to claim the credit based on your circumstances.
Photos by Jeff Mindell
Taxes and business finances can feel intimidating, but practical systems and professional guidance make them manageable. Establish monthly bookkeeping habits, track mileage reliably, evaluate tax strategies before major financial events like home purchases, and consult a qualified tax advisor about entity structure and available credits. Those steps not only reduce stress at tax time, they can save you money and help your business grow.
This post was created in partnership with TurboTax. All content and opinions are my own. Thank you for supporting the sponsors that help keep the Studio DIY work going. Read more about editorial policies on the original site.