If you're a sales rep, you may have expenses that a person working a regular 9-to-5 job doesn't have. Landing a sale takes time, energy and sometimes even a cash outlay to make the best impression possible. Determining how much of those expenses you can write off your taxes can be complicated, but figuring it out can often save you money or at least get you some of it reimbursed come tax time.
Your tax write-off opportunities will largely be determined by your status as either an independent contractor or paid employee.
Independent Contractor or Employee Status
If you are a sales rep that receives a salary and commission from a company, then you're an employee. In many cases, expenses for landing clients are covered by the business, either through an expense account or reimbursement. So, if you took a potential client out for a fancy dinner, it either went on the expense account card or you submitted the receipt for reimbursement. However, if you have no such luxury at your job, or you are an independent contractor, these some of these expenses can be written off your taxes. So, you might not get directly reimbursed, but they can lower your tax burden.
If you're an independent contractor, you are self-employed and therefore required to file a Schedule C along with a Form 1040. In this instance, listing every expense is definitely a benefit for you because it offsets your tax burden.
Your Vehicle and Other Travel Expenses
If you're an independent contractor and you use your car for work, then you can deduct those expenses from your taxes. The IRS gives you two options: flat-rate mileage or itemized expenses. In other words, you can deduct gas, oil, oil changes, tire rotations, car washes and other expenses directly related to your work vehicle, or you can track your mileage and use the standard mileage rate.
If as an independent contractor your business requires you to fly, stay in a hotel or make other lodging arrangements, these expenses are also deductible. Depending on the situation, your meals and car rental may also be deductible.
Other Qualifying Expenses
If you have an office, then anything you buy for the office that you use for the business is deductible. Computers, a desk, office supplies and the printer can all be deducted as business expenses on your taxes. If you need the internet or a cell phone to properly run your business, that can also be counted as an expense. If you work out of your home, you can also claim a home office exemption. This is really valuable for people who rent since it allows them to write off a portion of their living expenses, something that is usually only a benefit for a homeowner with mortgage interest.
Did you get shiny new business cards as an independent contractor? Those can be included as business expenses. Do the business cards sport your new logo that is part of your new marketing campaign? The cost of the logo and the marketing are also deductible. If you're listed in trade journals, have a website or blog or pay an attorney or accountant, all of these expenses can be written off your taxes as business expenses.
- Internal Revenue Service: Topic 510 - Business Use of Car
- Internal Revenue Service: Topic 511 - Business Travel Expenses
- Internal Revenue Service: Topic 514 - Employee Business Expenses
- Internal Revenue Service: Topic 513 - Educational Expenses
- Mapview: 10 Tax Tips for Sales Professionals
- Nolo: Tax Deductions for Salespeople
K.A. Francis has been a freelance and small business owner for 20 years. She has been writing about personal finance and budgeting since 2008. She taught Accounting, Management, Marketing and Business Law at WV Business College and Belmont College and holds a BA and an MAED in Education and Training.