If you own and operate a small business in Tennessee, there is a good chance that, at one point or another, your business and personal funds will intermingle. Ideally, you should prevent this from happening as it could complicate your taxes. However, if commingling has already occurred, you need to differentiate between personal and business expenses so that you can make the proper deductions. FindLaw breaks down the differences between person and business expenses for tax purposes.
Some expenses are more clear-cut than others. For instance, if you paid for legal or accounting fees that were directly related to your business operations, it is safe to say that you can include those fees as a business deduction. However, how you file for those deductions depends on the reason or the fees. For instance, if you accrued fees for tax advice or producing or collecting taxable income, you would use Schedule A on Form 1040. You should also bear in mind that if you incurred fees while acquiring business assets, you generally will not be able to deduct them.
If you use part of your home for business purposes, you may be able to claim a portion of the mortgage or rent payment along with a portion of the utility costs as a business expense. For your home to qualify as your principal place of business, however, it must meet two requirements. The first is that you must use it regularly and exclusively to carry out your business operations. The second is that you have no other location at which you can conduct your administrative or management activities for your business or trade.
You may be able to claim all of or a portion of the costs associated with your vehicle as a business expense. If you use your car strictly for business, everything from the cost of the vehicle to depreciation to maintenance fees to gas is deductible. However, if you use your vehicle for both business and personal reasons, you will need to divide your expenses based on the mileage traveled for each purpose.
You should not construe this content as legal advice. It is for educational purposes only.