Prepare Your Bookkeeping Deductions Early

Episode 59 

Tax Deductions for the tax year of 2025 (Personal and Business)  

As we are all preparing to go into the summer months, it’s time to discuss the 2025 tax deductions as we work on our business books and start preparing for the paperwork that our accountants and tax preparers will need.  This early in the year, you ask?  Sure, Boy Scouts.  Be Prepared.  Let’s not wait until the last minute.  Welcome to the time for vacations, hot weather, beaches, swimming pools and the beginning of tax preparations for 2025.  I’m Paul Rosenblum. 

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Let’s start with personal taxes if you don’t have your own business.  If you are working for someone else as a W-2 employee and want to do a simple 1040 EZ tax return, the standard deductions for 2025 are as follows: 

Single Filers: $15,000.00 deduction. This means that if you don’t have any itemized deductions in 2025, and you make $40,000 a year, let’s say, you can reduce the taxable income, or your adjusted gross income (AGI) would be $25,000.00.   This works if you don’t have kids, don’t own property, and have no deductions for 2025.  Talk to your tax preparer about that since rules change and you might have deductions that you don’t know about.  Married but filing separately: $22,500 for head of household, $30,000 for married but filing jointly. If you are a senior citizen, there is an additional $2,000 if you are 65 or older.  Gifts up to $19,000.00 are not taxable to the recipient. College and trade schools are NOT deductible but check out the “American Opportunity Tax Credit” and “The Lifetime Learning Tax Credit”.  These are not deductions, but credits that are available that give you a dollar-for-dollar reduction. Check out the links in the show notes.Medical Expenses: Medical expenses not covered by insurance (or co-pays) are deductible only if they meet the threshold of 7.5% of your AGI or adjusted gross income.  So, after all other deductions, the last thing that your tax preparer will do is see if the total of your out-of-pocket medical costs meet that threshold.  You would have to keep all receipts and itemize the medical costs. Payments for in-hospital care are included in this category. And these include hospital costs like rooms, food, as well as home health care such as visiting health professionals.  Eye exams, glasses, contacts are also included.  If you have a medical co-pay and you are reimbursed by an employer, then they are not tax deductible. Medicare premiums ARE deductible, as well as any other health insurance that an individual is paying for. If you own a house (not a renter): Energy improvements – not a straight deduction, but there are credits for items like solar panels, solar water heaters and similar improvements.  The credits are up to $3,200.00.  Talk to your tax preparer about that one.  If you have a 401K or a 403B and take money out, before you receive the money, 20% will be deducted for the IRS. 

Needless to say (but I’ll say it anyway), if you want to take advantage of these, you have to keep very good records throughout the year.  You can keep spreadsheets and documents and submit them to the tax preparer, but you have to keep receipts and all documentation if ever audited by the IRS.  

If you look at the transcript for this episode, I will include a screen shot of a chart of the tax rates for the amount of income earned.  

Business Taxes: 

Standard operating expenses for businesses are deductible.  We have spoken about these before in The Chart of Accounts episodes, but here is a quick list.  

Rent and leases (including vehicles if the car or truck is purchased by the company and registered by the company) UtilitiesInsurance premiumsRepairs and MaintenanceAdvertising/MarketingTravel and transportation costs (if business related of course)Professional fees such as bookkeeping, accounting, subcontracting, and attorney feesSalaries and wages to employees.Internet and TelephoneContinuing Education if it relates to your current job or business.SubscriptionsInterest/CC Finance ChargesMeals and snacks (50% deductible)If you are in the Accrual method, then write-off’s are deductible. *All of the above are regular expenses in the books* All Cost of GoodsIf you have a pass-through company (LLC or S Corp), after everything else is done, 20% of the AGI (adjusted gross income) can be deducted. *No entry in the books, just on the tax return* Section 179 (which many accountants don’t want to use because it’s more time),  allow a business to take 100% of the price of qualifying new or used equipment and rather than depreciate over a period of years, deduct 100% in the year that it was purchased. The limit for Section 179 is $1,250,000.00 in 2025. *Usually booked as an ‘other expense’ which shows up on the bottom of the profit and loss report* Bonus Depreciation is 40% for qualifying equipment or vehicles. One example of that is if a vehicle is more than 2 tons, it might be eligible for bonus depreciation. So, have receipts for any assets purchased ready to give to your tax preparer.  *Will be booked on the balance sheet* Home Office Deduction: If you have a home office and are self-employed, then you could get a tax deduction for the space used and the equipment purchased for the business.  It’s a complicated equation that is partially on the 1040 form and partially on the Schedule C for the self-employed. *I’d  suggest booking these expenses as an ‘other expense’ so it can be found easily by the tax preparer. If you pay your own insurance premiums, then they are deductible.  So, keep receipts!  *Book this as an ‘other expense’ If you move your business at least 50 miles, then part or all of those expenses could be deductible, but NOT if you have a home office.  If you are just starting a business and have ‘startup costs’ (Episode 1), then those will end up being tax deductible.  Depending on the amount of startup expenses, they could be deductible in one year or several years. Charitable deductions (for individuals and businesses): A business can write off 60% of your donations if they are cash donations to a qualifying charity that gives you a tax receipt. If you are a sole proprietorship, the IRS recommends that donations be included in your personal taxes, not on the schedule C.  In bookkeeping, donations would be booked in the business books also as an ‘other expense’ so that the tax preparer can separate that category easily. Tax deductions for Retirement Plans: Roth IRA, traditional IRA, Keogh Plan, and a solo 401K are eligible, but talk to your tax preparer about that one. Self Employed Estimate Dates: April 15th, 2025, June 16th, 2025, September 15th, 2025, and Jan 15, 2026. 

I hope this episode helps you in planning for the rest of this year. Have a great July 4th which is coming up shortly!  Have a great summer!  I’m Paul Rosenblum.