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LLC Tax Write-Offs and Tax Deduction Cheat Sheet

Last Updated: May 9, 2024, 10:40 am by TRUiC Team

When you form an LLC your business gets privileged tax benefits like self-employment deductions and business expense write-offs. 

This LLC expenses cheat sheet will help you write off and deduct startup costs, travel expenses, vehicles, business income, services, and more. It will even help you minimize your LLC’s taxable income.

Recommended : 1-800Accountant offers a free consultation. Schedule yours today . They can answer questions about this cheat sheet and help to save you money. 

Popular LLC Tax Write-Offs

Running an LLC comes with some amazing benefits, including tax write-offs that could save you a bundle. Just imagine how much you can save on your taxes with write-offs like:

• Self-Employment Tax: When you run an LLC, you can deduct a portion of your self-employment tax.
• Charity and Gift Contributions: If you make charitable donations through your LLC, these can often be written off.
• Start-Up Costs: Initial expenses to get your business off the ground can be deducted in your first year of operation.
• Business Travel Expenses: Costs related to business travel, including meals, accommodation, and transportation, are deductible.
• Vehicles: If you use a vehicle solely for business purposes, it can be a tax write-off.
• Office Supplies and Services: Everyday business essentials, from computers to stationery, are tax-deductible.
• Home Office: If you use a part of your home exclusively for business, you can write off a portion of your home expenses.
• Health Insurance Premiums: If you're self-employed and pay for your own health insurance, you may be able to write off these costs.
• Depreciation: For long-term business assets like machinery or buildings, you can write off the loss in value over time.
• Professional Services: Fees paid to attorneys, accountants, consultants, and other professionals can be written off as business expenses.

Remember, it's crucial to keep detailed records of all your business expenses for tax purposes. You’ll need accounting software to manage your business. We like Freshbooks , which we cover in-depth in our Best Accounting Software review.

Get Free Advice

The CPAs and tax professionals at 1-800 Accountant, can provide you with personalized advice tailored to your specific situation. 

More LLC Tax Deductions and IRS Insights

It’s important to understand the subtleties of what is and what isn’t considered a write-off. Below, we have expanded upon the most important categories that can qualify for deductions with their IRS-imposed limits and restrictions. 

Self-Employment Tax

Self-employed individuals, including independent contractors, freelancers, and business owners, are responsible for paying both income and self-employment taxes on their income. However, if you’re self-employed, you can write off half of your self-employment tax as an income tax deduction .

Note: LLCs taxed as an S corp can save on self-employment taxes under the right circumstances. Visit our LLC vs S Corp guide or use our S corp calculator to see what's right for your small business.

IRS Reference: Topic 554: Self-Employment Tax

Startup Business Expenses

If you have $50,000 or less in startup costs and are in your first year of business, the IRS allows you to deduct $5,000 in startup costs and $5,000 in organization costs as a tax deduction.

If your startup expenses exceed $50,000, the total deduction will be reduced by however much your expenses exceed $50,000. For example, if your total startup expenses total $51,000, your allowed deduction will be $4,000.

This deduction does not apply if you have more than $55,000 in startup costs.

IRS Reference: Publication 535: Business Start-up and Organizational Costs

Note: The average freelancer/contractor overpays on their taxes by about 21%. Get a dedicated business bank account with a tax optimizer to help you save money at tax time. We recommend Lili .

Office Supplies and Services

Generally speaking, office supplies refer to those that are used to run day-to-day office activities, such as papers, pens, sticky notes, ink, printing, postage, and delivery services. 

Small business owners can deduct the entire office expense by using write-offs on the cost incurred on the incidental materials and supplies.

Tip: Use net 30 vendors for purchasing office supplies to help build business credit

IRS Reference: Publication 535: Supplies and Materials

Advertisements

Any expenses directed toward advertising , marketing, and/or promotions is a tax deduction. This includes but is not limited to logo creation, printing business cards, website updates, printing costs, and social media marketing. Some businesses also use large advertising mediums like billboards and television commercials.

IRS Reference: Publication 535: Advertising Expenses

Business Insurance

Business insurance includes any kind of protection required to run a business safely. Though the insurance varies based on business type, there are several premiums you could deduct, including those for property coverage, employee health insurance, general liability insurance , workers' compensation insurance , or professional liability insurance .

IRS Reference: Publication 535: Insurance

If your business isn't covered by insurance, it needs to be. Our review of the best small business insurance companies is a helpful resource.

Business Loan Interest and Bank Fees

You may be able to deduct interest charged on a business loan, including interest rates, monthly service fees, business banking overdraft costs, and payment processing fees. The IRS provides guidelines on what types of loan interest are considered deductible and what types are nondeductible.

Those with business credit cards can also deduct the convenience fees.

Tip: See our review of the best business credit cards to find an easy-approval secured or unsecured credit card for your small business.

IRS References: Publication 535: Interest You Can Deduct and Publication 535: Credit Card Convenience Fees

Any educational courses or forms of training used to acquire new skills or certification for your business can be a tax deduction. This can include books and research materials that assist with professional development.

For the cost to be deductible, your education must be aimed at improving skills or maintaining your job, salary, or status. Any expenses used for the education and training of employees are also deductible.

IRS Reference: Publication 535: Education Expenses

Depreciation

The IRS describes depreciation as "an allowance for the wear and tear, deterioration, or obsolescence of the property." In other words, depreciation is a tax deduction that allows businesses to write off the value of certain tangible property over a period of time, typically throughout that property's "useful life."

If you use property partially for business use and partially for personal use, you can only deduct depreciation on the business usage. For example, if you purchase equipment for $20,000 and use it for business only 75% of the time, the business portion of that equipment's cost is only $15,000.

IRS Reference: Publication 946: How to Depreciate Property

Home Office Deduction

If your business operates out of your home , you can take advantage of the home office deduction that results from the cost incurred for business purposes. This includes rent, utilities, repairs, maintenance, cleaning, and any other expense associated with the office space.

You can compute your home office deduction by calculating the cost, multiplying by the area's square footage, and subtracting the value from the total. Alternatively, you can use the IRS simplified method , where you deduct $5 per square foot of office space for a maximum of 300 feet.

IRS Reference: Publication 535: Personal Versus Business Expenses

A professional accounting service can help you save money and time so you can focus on running your business. Hire a professional bookkeeper for a low monthly cost with Xendoo or do your own accounting with Freshbooks .

Legal and Professional Fees

Some legal and professional fees are considered deductible, including lawyers, bookkeepers, tax professionals, and accountants that you employ in order to operate your business.

IRS Reference: Publication 535: Legal and Professional Fees

Travel Business Expense

Self-employed people can write off certain travel expenses for their businesses, including but not limited to airfare, business meals, lodging, and local travel. 

The IRS defines travel expenses as a business trip outside your tax home, overnight, and for business roles. That being said, there are some restrictions that are stipulated for international travel.

IRS Reference: Topic 511: Business Travel Expenses

Business Car Usage

A portion of the costs associated with business vehicles is deductible every tax year, including mileage and other operating costs for cars, trucks, and other commercial vehicles. If you use a vehicle for both business and personal usage, only the business costs will be eligible for tax deductions. 

Companies can either use the standard mileage rate or actual car expenses for their business tax deductions. The standard mileage rate for business vehicle use is 57.5 cents per mile. Actual car expenses can include depreciation, licenses, gas, tolls, maintenance, lease payments, insurance, and parking fees.

IRS Reference: Publication 463: Car Expenses

Rent spent on office space (or the cost spent on space occupied by office equipment if you work from home) may be considered for tax deductions. Spaces that you rent out occasionally for work purposes can also be considered write-offs.

IRS Reference: Publication 535: Rent

Rented Equipment

Similar to the above, business equipment that is rented for certain small business services (e.g., construction equipment, power tools, etc.) can be considered a deduction. (Personal equipment is excluded from this deduction.)

Such equipment comes with additional costs, such as liability insurance and money spent on renting it. The insurance cost is meant to offer security to the equipment owner, and such costs are deductible to reduce business expenses.

Cost of Goods Sold

Businesses that buy products for resale or make products can deduct the cost of goods sold (COGS) from their gross receipts. COGS may include raw materials, labor, and supplies.

IRS Reference: Publication 535: Cost of Goods Sold

Retirement Contributions

LLC tax deductions may also cover a self-employed individual's retirement contributions . The total amount of the deduction will depend on the individual's retirement plan and their maximum contribution limits.

IRS Reference: Calculating Your Own Retirement-Plan Contribution and Deduction

Charity and Gifts

Charitable contributions in the form of cash payments are often deductible. Although, any charitable contributions made must be directly related to your business to be deductible. For example, a donation made to bring a business convention to your community would not be considered a charitable contribution.

All or part of the expenses used for business gifts can be deducted. That being said, the IRS implements a $25 deduction limit on every direct and indirect gift your business gives individuals throughout the tax year.

IRS References: Publication 535: Charitable Contributions and Publication 535: Gifts

Any business-related expenses for utilities , including heat, electricity, telephone services, water, and sewerage, can be deducted. If you work from home, you cannot deduct basic telephone service; however, you can deduct the costs of long-distance business calls as well as the installation of a second, separate telephone line.

IRS Reference: Publication 535: Utilities

How to Minimize Your LLC’s Taxable Income

Self-employed business owners may face several tax burdens when starting their new business. Below are some saving techniques that could help maximize your profits at tax time.

Utilize Above-the-Line Deductions

Above-the-line deductions are the expenses used to calculate your adjusted gross income (AGI), which is then used for below-the-line deductions (i.e., most business expenses).

Above-the-line deductions can be calculated using Schedule 1 of your individual tax return and can include educator expenses, self-employed retirement plans, self-employed health insurance, and early withdrawal penalties.

Pay Taxes on Time

Self-employed individuals are mandated by the IRS to pay their designated taxes quarterly. Fail to comply, and you will be subjected to penalties and potentially high fines.

A paycheck calculator can be an effective starting point to execute timely tax payments., as it can help you discover the quarterly amount required to pay. In addition, it also helps you discover a deductible itemized list.

Save Funds for the Tax Season

Even if you already pay your required quarterly payments on time, it's good practice to set funds aside in a business bank account for tax filing. Even if you think that your tax payment will be the same as years prior, it's important to keep track of your business income so that you can account for any fluctuations.

In many cases, if you underpay the IRS for your quarterly taxes, you will not be penalized if you still paid 100% of what you paid the previous tax year. Still, some individuals, including those whose AGI was more than $150,000, have different thresholds.

Know What Taxes You Need to Pay

In addition to both federal and state income tax, you may also need to file a state-specific business tax . For example, some states levy a business privilege tax or franchise tax on certain business structures, including LLCs. These can be flat rates or dependent on your business’s profits.

Incorporate Your Business

If you operate your business as a sole proprietorship or a partnership, you can choose to incorporate it as an LLC or corporation. Not only will this move provide you with limited liability protection, but it will also provide you with unique tax benefits.

Outsource for Help

While you can research and complete your tax deductions yourself, using a professional service  to help determine your business expenses can help ensure that you find the best write-offs for your business's activities.

Tax Deductions vs. Tax Credits

Tax deductions, or write-offs, reduce your taxable income but tax credits reduce your tax burden, dollar for dollar. You are able to claim both deductions and credits on your tax return, but you cannot claim the same expense, both as a deduction and as a credit. 

For example, if you purchase health insurance premiums for your employees that can be written off as an expense on your Schedule C, you can also claim a tax credit for that expense. In most cases, if you can claim a tax credit for an expense, it is best to go with the credit. 

Here is an example to illustrate the difference between deductions and credits:

Let’s say you own a coffee shop, incorporated as a Limited Liability Company (LLC), and, for the year 2021, your business earned $100,000 in revenue. The cost of running your business was $30,000, which you took in the form of tax deductions.

Now your taxable income is $70,000 instead of the full $100,000. As LLCs have pass-through taxation, you will end up paying taxes on this income based on your personal income tax bracket. Your estimated tax would be $17,500 (with a tax rate of 25%).

On the same token, if you claimed $0 in deductions, then your taxable income is $100,000, and your tax burden would be $25,000 with a 25% tax rate. If you claimed a tax credit of $30,000, you would pay $0 in taxes and have $5,000 in credits to carry over to next year if it is a non-refundable credit and has a carryover, or you can get $5,000 refunded if it is a refundable tax credit.

Here’s a visual representation:

*Carry over if it’s a non-refundable credit or get a check from the IRS if it’s refundable credit.

To claim credits on your tax return, you would have to complete the specific form related to the particular credit. You can find all the Internal Revenue Service forms for business tax credits on the IRS website .

Tax Write-Offs for LLCs: FAQ

What expenses can you write off as an llc.

There is a long list of expenses that you can deduct as an LLC. Some of the main operating costs that can be deducted include startup costs, supplies, business taxes, office costs, salaries, travel costs, and rent costs. Your personal income tax cannot be considered a tax write-off. 

Check out our LLC expenses cheat sheet to learn more.

What are tax credits?

A tax credit is an amount of money that taxpayers can subtract from the taxes they owe the government. There are two types of tax credits: refundable and nonrefundable. A refundable tax credit can be used to reduce the amount of taxes owed, and if the credit is more than the amount of taxes owed, taxpayers will receive a refund for the difference. A nonrefundable tax credit can only be used to reduce the amount of taxes owed; it cannot result in a refund.

Can an LLC write off food expenses?

Yes, food expenses are deemed deductible costs. This will only happen if the meals are with a business contact and aren't “lavish or extravagant.” You can cut 50% of the business meal costs or 100% based on the temporary 2021/2022 exception .

How do you write off a car as a business expense?

If you use your own car for business purposes, you can incorporate it as a business expense. In addition, if you lease a car for business use, you can indicate the percentage of business functions it serves for your business.

Can an LLC deduct expenses without an income?

There are certain thresholds that the IRS has put in place to determine whether you can deduct costs without earnings based on whether you have a true business or if it’s considered just a hobby.

Can you write off capital expenditures?

Unlike ordinary business expenses, the IRS doesn’t allow capital expenditures to be immediately deducted from a business's profits. Instead, they are gradually deducted from your business profit over the course of several years through amortization, or the depreciation of an asset’s value over a fixed period of time.

Are tax write-offs the same thing as a tax loophole?

No. A tax-write off is a business expense that can be deducted from your LLC's taxable income. An LLC tax loophole is a tax provision or an unforeseen impact from legislation that leads to tax savings for the filer. There are known tax loopholes in the US for LLCs but they are very rare— . mostly impacting a very small number of LLCs and often involving real estate acquisition.

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Single Member LLC Tax Write Offs

Single member LLC tax write offs can be done for normal and necessary expenses connected with your business operations. 3 min read updated on February 01, 2023

What Is a Single-Member LLC?

A single-member LLC is first formed as a regular LLC after filing articles of incorporation. It then gets the status of a single-member LLC because of having only one member.

For an entrepreneur looking to retain full control yet more protection than a sole-proprietorship business, a single-member LLC offers a middle path between a partnership firm and a corporation. It's a perfect structure for owning a rental property and operating home-based businesses.

Single-Member LLC and Personal Liability Protection

A single-member LLC is simple, less costly, and easier to manage. However, it comes with some modifications in personal liability protection.

A regular multimember LLC gives you a charging order protection, meaning your personal creditors cannot force to settle their claims from other partners' interests in the LLC; they can only claim your share of profits in the LLC. But when you become a single-member LLC, your business becomes a disregarded entity in the eyes of the Internal Revenue Service (IRS). Thus, a single-member LLC becomes much like a sole proprietorship business , and you are required to file your business taxes by attaching Schedule C to your individual tax returns.

As the owner of a single-member LLC, you are personally liable for your business liabilities. Usually, LLCs are not responsible for personal obligations of the owners. However, as a disregarded entity, a single-member LLC is more likely to be held accountable for the personal liabilities of the owner.

You may want to set up a manager-managed LLC, wherein you remain the ultimate decision-maker, while your partner has a limited exposure to business operations. Both of you get to have personal liability protection. Nevertheless, the tax structure can be very costly for most types of businesses, except for a rental property business.

Single-Member LLC Tax Benefits

The most obvious but lesser-known benefit of operating as a single-member LLC is that it lets you deduct the expenses that might not be tax deductible otherwise . Many single-member LLC owners who work from home write off their personal expenses for their vehicle, mobile phone, or internet services as business expenses. Even the expenses incurred for kids, friends, and relatives can become tax deductible when they pitch in for business activities such as trade shows and exhibitions.

If your LLC has an operating loss, you may not be able to deduct the whole amount, since it may be limited by the at-risk rule. A single-member LLC owner is liable to pay tax on self-employment earnings just like a sole proprietor.

Single-Member LLC Tax Write-Offs

Just like any other business structure, an LLC can also deduct expenses connected with the business. These expenses can vary, depending on the type of business operations an LLC is engaged in. Irrespective of the business structure, business owners should be aware of the deductibility rules applicable to different types of expenses.

As a general rule, a business can deduct business expenses if they are ordinary and necessary. According to the IRS, an ordinary expense refers to one that is common in your trade or industry. In order to be deductible, the ordinary expense must also satisfy the criterion of being necessary. A necessary expense refers to one that is justified and helpful for your business. It need not be absolutely indispensable to be considered as a necessary expense.

You can deduct most of the business expenses as you incur them. However, certain expenses, such as those incurred for purchase of business equipment, buildings, vehicles, etc., whose useful life spreads over a period of several years, must be capitalized . You can recover the cost through depreciation over the life of the purchased item.

If your business involves sale or production, you must maintain proper records of inventories. You must capitalize the inventory costs and deduct them as costs of goods sold.

Single-Member LLC: Personal Property Write-Offs

• For property purchases, you can deduct up to $100,000 in a financial year.
• The deduction does not include real estate, intangible property (i.e., trademarks, patents, copyrights, etc.), and certain other assets.
• The deduction, however, includes equipment, computers, office furnishings, and standard computer software bought as a product.
• If your total purchases of deductible property exceed $108,000 in a given year, you must depreciate the excess amount over the useful life of the property.

If you need help with single-member LLC tax write-offs, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

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• Can an LLC Have One Member
• Filing Taxes as an LLC Single Member
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• Single Owner LLC Taxes – Everything You Need to Know
• Single-Member LLC to Multi-Member LLC

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15 tax write-offs for llc.

Running your own business is rewarding, but it can also come with many expenses to grow your LLC. From advertising and startup expenses to employee and legal fees, these costs can add up. Fortunately, there are easy ways to track these expenses and save your hard-earned profits, without having to reduce your essential business spending. Learning how to write off business expenses for LLCs can help you reduce your taxable income by claiming common business expenses as income tax deductions.

Key Takeaways 

• LLC tax deductions can help you save money without cutting corners on business spending.
• Some allowable tax deductions for LLCs include self-employment taxes, legal fees, home offices, and other common and necessary business expenses.
• Some write-off amounts, like vehicles and home expenses, will depend on whether your expenses are exclusive to business or a mix of personal and business use.
• Keeping accurate records and saving receipts are key to claiming business write-offs.

Table of Contents

15 LLC Tax Deductions

• Elevate Your Tax Preparation with FreshBooks
• Frequently Asked Questions

The Internal Revenue Service offers a number of LLC tax write-offs for owners so you can reduce your taxable income and save money.

1. Self-Employment Tax Deduction  

Minimizing your tax liability through the self-employment tax deduction is one of the most significant ways to reduce taxable income for LLC owners. If you’re the sole owner of a limited liability company, you’re obligated to pay the full cost of the self-employment tax . In 2023 and 2024, that cost is 15.3%, which includes taxes for both Medicare and Social Security. However, you’re able to reduce this income tax burden by declaring and deducting half of that amount, or 7.65%, on your federal income tax return

2. Legal and Professional Fees  

There are a number of professionals you may need to hire to advise you on running your LLC. The professionals may include an accountant or tax professional, notaries, and legal professionals. Whether it’s for bookkeeping, contracts, or document preparation, you can deduct the cost of legal and other professional fees to reduce your tax bill. The deduction applies to everyday business costs like preparing financial documents and records, as well as to things like tax audits and legal cases where you may be required to hire a professional team to manage unique circumstances.

3. Automobile Expenses  

When you use your car or other vehicle for your LLC, you can deduct common auto expenses from your qualified business income. Vehicles that are exclusively for business usage qualify for deducting the full cost of the vehicle, miles driven, parking fees, and fuel. You can also include depreciation since your vehicle qualifies as a business asset. If your vehicle is used for a mix of personal and business transport, you’ll have to calculate what percentage is used for business and write off only that amount. 

4. Bank Fees and Interest  

Running an LLC may come with significant banking fees. You may have to take out startup loans to finance your business, use credit to purchase new equipment or pay fees to maintain a business account at your bank. From interest on purchases made with credit to the interest on business and startup loans, interest payments on your business banking are fully tax deductible. Business owners can also deduct everyday business banking fees for things like money transfers, new checks, and business bank account name fees.

5. Home Office  

If you use a home office for managing your LLC, you can deduct a portion of your home office expenses . This includes a portion of rent for renters or a portion of property taxes and mortgage payments for homeowners. Deductions are based on the square footage of your home office, and the space must be used exclusively for business purposes. Business owners are also able to deduct a portion of relevant costs like the internet, so it’s important to save receipts for all expenses related to your home office.

6. Office Supplies  

Whether you work from home or at an office, you can deduct the cost of office supplies for your LLC on your tax return. Some common office supply deductions include:

• Printing paper
• Printer ink
• Office furniture, including desks and desk chairs
• Software subscriptions like Microsoft Office
• Postage costs
• Office cleaning supplies

Business owners can also deduct the cost of computers, printers, and other office equipment that’s used for business purposes. Eligible supplies include everything from minor purchases of pens and ink to major things like equipment and furniture, so it’s worth saving your receipts for office supply write-offs.

7. Travel Expenses  

When you travel for work, you’re able to deduct almost all of your business travel expenses . These deductible expenses can include:

• The cost of flights, train tickets, and other modes of transport
• Hotels and business lodging
• Car rentals, parking, and fuel
• Rentals for conference rooms and other business meeting essentials

Save all receipts from your business expenses when you travel so that you have clear proof that your expenses were necessary and related to the work of your LLC. Non-business expenses, such as personal entertainment expenses, don’t qualify for write-offs even if they’re incurred while you’re on a business trip.

Ready to make tax season easier than ever? FreshBooks helpful videos on tax preparation help you save money while making LLC tax return filing quick and easy.

8. Phone and Internet  

As long as your phone and internet are used for business purposes, you can deduct the cost of your cell phone and internet bills. For office phones and internet, you can deduct the full costs, whereas for home phone and internet, you can deduct the portion that you use for business. This also applies to the cost of new phones and internet-related equipment like modems that you need to conduct your business.

9. Business Meals  

You can deduct 50% of the cost of most business meals at restaurants. This includes meals with employees, clients, and other work connections where you actively discuss work during the meal. This applies to your personal food or to your total bill if you’re treating clients to a meal. There are also some food expenses that are 100% tax-deductible, such as snacks for customers, food at events for charitable contributions, or food for employee events like annual parties. You can also deduct 100% of meal costs if they’re directly related to your business—for example, if you work as a restaurant critic or food reviewer.

10. Business Startup Costs  

New LLC business owners can deduct some of the costs of creating a company. Particularly if you’ve invested money to start your new business, this write-off of startup expenses can help reduce financial strain. If your total costs for starting a business are $50,000 or less, you can deduct up to $5,000 of those costs in your first tax year. These deductions decrease dollar by dollar if your startup costs exceed $50,000, and the remainder is deductible over 15 years.

11. Advertising and Promotions  

Starting your LLC can require a significant amount of promotion to attract new clients and grow your business. You can deduct a wide variety of advertising and promotional elements, including:

• Printing costs for business cards and posters
• Ads for television, online, and social media
• The cost of designing and maintaining your website
• Promotional events
• Sponsorships of local events, sports teams, etc.

12. Business Insurance  

There are a wide variety of business insurance types, and most of them can be deducted from your taxes since they’re considered ordinary and necessary. Ordinary refers to commonly used in your industry, while necessary is required for your business. You may have liability insurance, property insurance, or even an errors and omissions insurance to protect yourself and your LLC. Some businesses also provide employee health insurance and other employee support. You can deduct these insurance premiums from your taxes as a business expense. Life Insurance is not deductible on your tax return.

13. Education Expenses  

You can deduct continuing educational expenses for yourself and the employees of your LLC. The educational program must be related to your business, meaning it increases your business expertise or adds other value to your LLC. However, it cannot be a new and unrelated degree you’re getting. You can also get a tax deduction for up to $5,250 for your employee’s tuition payments.

14. Healthcare Expenses

You can deduct all the insurance premium payments from your tax return. In addition, if your medical expenses add up to more than 7.5% of your adjusted gross income, you may be able to write some of them off on your taxes. These expenses must be unreimbursed by others, for example, your health insurance. Some qualifying expenses include:

• Fees for medical practitioners like doctors, surgeons, and dentists
• Hospital and care home costs
• Insulin and other prescription drugs
• Medical devices including dentures, eyeglasses, and hearing aids
• Travel expenses related to obtaining medical care

Elevate Your Tax Preparation with FreshBooks 

As a small business owner, there are many ways you can use tax deductions for LLC owners to reduce your taxes and save money. There are costs like office supplies and advertising that you can claim completely on your tax return, and other ones like home office deductions and vehicle expenses for business use.

When claiming your tax write-offs for LLCs, it’s essential to document your business expenses and keep track of your receipts. FreshBooks accounting software lets you log and categorize all of your expenses, so it’s easy to find the totals when it’s time to pay taxes. Try FreshBooks free and discover the features that can support your small business today.

Looking for even more information on how the business tax deductions and write-offs work for LLCs? Explore resources on Small Business Tax Deductions to learn even more strategies for saving money.

FAQs About Tax Write-Offs For LLCs

Learn even more about filing as an LLC and the ways that tax deductions can reduce your taxable income.

Can a single-member LLC write off expenses?  

Yes, single-member LLCs can write off a variety of business expenses. This includes some startup costs, home office expenses, business and health insurance premiums, and other business-related expenses.

Can you write off a car with an LLC?  

If your car is used for business purposes, you can write off some or all of your vehicle expenses as tax deductions for LLCs. If you use your vehicle exclusively for business, you can write off, fuel expenses, insurance car loan interest payments, and include depreciation of the asset if you use the actual expense method. You can also use the Standard Mileage Rate method to deduct a flat amount per driven mile. Parking and toll fees are deductible in addition to either method.

What deductions can I claim without receipts?  

You can claim self-employment insurance and business insurance without receipts, as long as you have a copy of your policy. The IRS will also not ask for expenses below $75.

Can I write off alcohol as a business expense?  

While you can write off some alcohol purchases as business deductions for LLCs, it’s important to be reserved in the spending and careful about reporting. Alcohol and other entertainment must be considered ‘ordinary and necessary,’ meaning some alcohol with dinner may be allowed, but extravagant liquor expenses may be flagged.

How much of your house can you write off for business?  

You can write off the portion of your home that you use for business. For example, the square footage of your home office represents a percentage of your home that’s necessary for business, and you can apply that to deduct your mortgage interest, a portion of rent, home insurance, and other home costs.

Can I write off clothing as a business expense?   

If your clothing is used to promote or run your business, you can write it off as a business expense. This includes things like special uniforms for yourself and your employees or promotional costs like shirts and hats printed with your logo.

Can I write off expenses at LLC with no income?  

Yes, even if your LLC has no income you can still write off expenses and report it as a loss. Since this counts as business activity, you need to clearly report it on your annual taxes. It can later be applied to offset future income once you begin turning business income into a profit.

More Useful Resources

Explore our diverse tax deduction guides catering to various niches. From small businesses to real estate agents, find valuable insights to optimize your tax savings.

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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How to Deduct Travel Expenses (with Examples)

Reviewed by

November 3, 2022

This article is Tax Professional approved

Good news: most of the regular costs of business travel are tax deductible.

Even better news: as long as the trip is primarily for business, you can tack on a few vacation days and still deduct the trip from your taxes (in good conscience).

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Even though we advise against exploiting this deduction, we do want you to understand how to leverage the process to save on your taxes, and get some R&R while you’re at it.

Follow the steps in this guide to exactly what qualifies as a travel expense, and how to not cross the line.

The travel needs to qualify as a “business trip”

Unfortunately, you can’t just jump on the next plane to the Bahamas and write the trip off as one giant business expense. To write off travel expenses, the IRS requires that the primary purpose of the trip needs to be for business purposes.

Here’s how to make sure your travel qualifies as a business trip.

1. You need to leave your tax home

Your tax home is the locale where your business is based. Traveling for work isn’t technically a “business trip” until you leave your tax home for longer than a normal work day, with the intention of doing business in another location.

2. Your trip must consist “mostly” of business

The IRS measures your time away in days. For a getaway to qualify as a business trip, you need to spend the majority of your trip doing business.

For example, say you go away for a week (seven days). You spend five days meeting with clients, and a couple of days lounging on the beach. That qualifies as business trip.

But if you spend three days meeting with clients, and four days on the beach? That’s a vacation. Luckily, the days that you travel to and from your location are counted as work days.

3. The trip needs to be an “ordinary and necessary” expense

“Ordinary and necessary ” is a term used by the IRS to designate expenses that are “ordinary” for a business, given the industry it’s in, and “necessary” for the sake of carrying out business activities.

If there are two virtually identical conferences taking place—one in Honolulu, the other in your hometown—you can’t write off an all-expense-paid trip to Hawaii.

Likewise, if you need to rent a car to get around, you’ll have trouble writing off the cost of a Range Rover if a Toyota Camry will get you there just as fast.

What qualifies as “ordinary and necessary” can seem like a gray area at times, and you may be tempted to fudge it. Our advice: err on the side of caution. if the IRS chooses to investigate and discovers you’ve claimed an expense that wasn’t necessary for conducting business, you could face serious penalties .

4. You need to plan the trip in advance

You can’t show up at Universal Studios , hand out business cards to everyone you meet in line for the roller coaster, call it “networking,” and deduct the cost of the trip from your taxes. A business trip needs to be planned in advance.

Before your trip, plan where you’ll be each day, when, and outline who you’ll spend it with. Document your plans in writing before you leave. If possible, email a copy to someone so it gets a timestamp. This helps prove that there was professional intent behind your trip.

The rules are different when you travel outside the United States

Business travel rules are slightly relaxed when you travel abroad.

If you travel outside the USA for more than a week (seven consecutive days, not counting the day you depart the United States):

You must spend at least 75% of your time outside of the country conducting business for the entire getaway to qualify as a business trip.

If you travel outside the USA for more than a week, but spend less than 75% of your time doing business, you can still deduct travel costs proportional to how much time you do spend working during the trip.

For example, say you go on an eight-day international trip. If you spend at least six days conducting business, you can deduct the entire cost of the trip as a business expense—because 6 is equivalent to 75% of your time away, which, remember, is the minimum you must spend on business in order for the entire trip to qualify as a deductible business expense.

But if you only spend four days out of the eight-day trip conducting business—or just 50% of your time away—you would only be able to deduct 50% of the cost of your travel expenses, because the trip no longer qualifies as entirely for business.

List of travel expenses

Here are some examples of business travel deductions you can claim:

• Plane, train, and bus tickets between your home and your business destination
• Baggage fees
• Laundry and dry cleaning during your trip
• Rental car costs
• Hotel and Airbnb costs
• 50% of eligible business meals
• 50% of meals while traveling to and from your destination

On a business trip, you can deduct 100% of the cost of travel to your destination, whether that’s a plane, train, or bus ticket. If you rent a car to get there, and to get around, that cost is deductible, too.

The cost of your lodging is tax deductible. You can also potentially deduct the cost of lodging on the days when you’re not conducting business, but it depends on how you schedule your trip. The trick is to wedge “vacation days” in between work days.

Here’s a sample itinerary to explain how this works:

Thursday: Fly to Durham, NC. Friday: Meet with clients. Saturday: Intermediate line dancing lessons. Sunday: Advanced line dancing lessons. Monday: Meet with clients. Tuesday: Fly home.

Thursday and Tuesday are travel days (remember: travel days on business trips count as work days). And Friday and Monday, you’ll be conducting business.

It wouldn’t make sense to fly home for the weekend (your non-work days), only to fly back into Durham for your business meetings on Monday morning.

So, since you’re technically staying in Durham on Saturday and Sunday, between the days when you’ll be conducting business, the total cost of your lodging on the trip is tax deductible, even if you aren’t actually doing any work on the weekend.

It’s not your fault that your client meetings are happening in Durham—the unofficial line dancing capital of America .

Meals and entertainment during your stay

Even on a business trip, you can only deduct a portion of the meal and entertainment expenses that specifically facilitate business. So, if you’re in Louisiana closing a deal over some alligator nuggets, you can write off 50% of the bill.

Just make sure you make a note on the receipt, or in your expense-tracking app , about the nature of the meeting you conducted—who you met with, when, and what you discussed.

On the other hand, if you’re sampling the local cuisine and there’s no clear business justification for doing so, you’ll have to pay for the meal out of your own pocket.

Meals and entertainment while you travel

While you are traveling to the destination where you’re doing business, the meals you eat along the way can be deducted by 50% as business expenses.

This could be your chance to sample local delicacies and write them off on your tax return. Just make sure your tastes aren’t too extravagant. Just like any deductible business expense, the meals must remain “ordinary and necessary” for conducting business.

How Bench can help

Surprised at the kinds of expenses that are tax-deductible? Travel expenses are just one of many unexpected deductible costs that can reduce your tax bill. But with messy or incomplete financials, you can miss these tax saving expenses and end up with a bigger bill than necessary.

Enter Bench, America’s largest bookkeeping service. With a Bench subscription, your team of bookkeepers imports every transaction from your bank, credit cards, and merchant processors, accurately categorizing each and reviewing for hidden tax deductions. We provide you with complete and up-to-date bookkeeping, guaranteeing that you won’t miss a single opportunity to save.

Want to talk taxes with a professional? With a premium subscription, you get access to unlimited, on-demand consultations with our tax professionals. They can help you identify deductions, find unexpected opportunities for savings, and ensure you’re paying the smallest possible tax bill. Learn more .

Bringing friends & family on a business trip

Don’t feel like spending the vacation portion of your business trip all alone? While you can’t directly deduct the expense of bringing friends and family on business trips, some costs can be offset indirectly.

Driving to your destination

Have three or four empty seats in your car? Feel free to fill them. As long as you’re traveling for business, and renting a vehicle is a “necessary and ordinary” expense, you can still deduct your business mileage or car rental costs even when others join you for the ride.

One exception: If you incur extra mileage or “unnecessary” rental costs because you bring your family along for the ride, the expense is no longer deductible because it isn’t “necessary or ordinary.”

For example, let’s say you had to rent an extra large van to bring your children on a business trip. If you wouldn’t have needed to rent the same vehicle to travel alone, the expense of the extra large van no longer qualifies as a business deduction.

Renting a place to stay

Similar to the driving expense, you can only deduct lodging equivalent to what you would use if you were travelling alone.

However, there is some flexibility. If you pay for lodging to accommodate you and your family, you can deduct the portion of lodging costs that is equivalent to what you would pay only for yourself .

For example, let’s say a hotel room for one person costs $100, but a hotel room that can accommodate your family costs $150. You can rent the $150 option and deduct $100 of the cost as a business expense—because $100 is how much you’d be paying if you were staying there alone.

This deduction has the potential to save you a lot of money on accommodation for your family. Just make sure you hold on to receipts and records that state the prices of different rooms, in case you need to justify the expense to the IRS

Heads up. When it comes to AirBnB, the lines get blurry. It’s easy to compare the cost of a hotel room with one bed to a hotel room with two beds. But when you’re comparing significantly different lodgings, with different owners—a pool house versus a condo, for example—it becomes hard to justify deductions. Sticking to “traditional” lodging like hotels and motels may help you avoid scrutiny during an audit. And when in doubt: ask your tax advisor.

So your trip is technically a vacation? You can still claim any business-related expenses

The moment your getaway crosses the line from “business trip” to “vacation” (e.g. you spend more days toasting your buns than closing deals) you can no longer deduct business travel expenses.

Generally, a “vacation” is:

• A trip where you don’t spend the majority of your days doing business
• A business trip you can’t back up with correct documentation

However, you can still deduct regular business-related expenses if you happen to conduct business while you’re on vacay.

For example, say you visit Portland for fun, and one of your clients also lives in that city. You have a lunch meeting with your client while you’re in town. Because the lunch is business related, you can write off 50% of the cost of the meal, the same way you would any other business meal and entertainment expense . Just make sure you keep the receipt.

Meanwhile, the other “vacation” related expenses that made it possible to meet with this client in person—plane tickets to Portland, vehicle rental so you could drive around the city—cannot be deducted; the trip is still a vacation.

If your business travel is with your own vehicle

There are two ways to deduct business travel expenses when you’re using your own vehicle.

• Actual expenses method
• Standard mileage rate method

Actual expenses is where you total up the actual cost associated with using your vehicle (gas, insurance, new tires, parking fees, parking tickets while visiting a client etc.) and multiply it by the percentage of time you used it for business. If it was 50% for business during the tax year, you’d multiply your total car costs by 50%, and that’d be the amount you deduct.

Standard mileage is where you keep track of the business miles you drove during the tax year, and then you claim the standard mileage rate .

The cost of breaking the rules

Don’t bother trying to claim a business trip unless you have the paperwork to back it up. Use an app like Expensify to track business expenditure (especially when you travel for work) and master the art of small business recordkeeping .

If you claim eligible write offs and maintain proper documentation, you should have all of the records you need to justify your deductions during a tax audit.

Speaking of which, if your business is flagged to be audited, the IRS will make it a goal to notify you by mail as soon as possible after your filing. Usually, this is within two years of the date for which you’ve filed. However, the IRS reserves the right to go as far back as six years.

Tax penalties for disallowed business expense deductions

If you’re caught claiming a deduction you don’t qualify for, which helped you pay substantially less income tax than you should have, you’ll be penalized. In this case, “substantially less” means the equivalent of a difference of 10% of what you should have paid, or $5,000—whichever amount is higher.

The penalty is typically 20% of the difference between what you should have paid and what you actually paid in income tax. This is on top of making up the difference.

Ultimately, you’re paying back 120% of what you cheated off the IRS.

If you’re slightly confused at this point, don’t stress. Here’s an example to show you how this works:

Suppose you would normally pay $30,000 income tax. But because of a deduction you claimed, you only pay $29,000 income tax.

If the IRS determines that the deduction you claimed is illegitimate, you’ll have to pay the IRS $1200. That’s $1000 to make up the difference, and $200 for the penalty.

Form 8275 can help you avoid tax penalties

If you think a tax deduction may be challenged by the IRS, there’s a way you can file it while avoiding any chance of being penalized.

File Form 8275 along with your tax return. This form gives you the chance to highlight and explain the deduction in detail.

In the event you’re audited and the deduction you’ve listed on Form 8275 turns out to be illegitimate, you’ll still have to pay the difference to make up for what you should have paid in income tax—but you’ll be saved the 20% penalty.

Unfortunately, filing Form 8275 doesn’t reduce your chances of being audited.

Where to claim travel expenses

If you’re self-employed, you’ll claim travel expenses on Schedule C , which is part of Form 1040.

When it comes to taking advantage of the tax write-offs we’ve discussed in this article—or any tax write-offs, for that matter—the support of a professional bookkeeping team and a trusted CPA is essential.

Accurate financial statements will help you understand cash flow and track deductible expenses. And beyond filing your taxes, a CPA can spot deductions you may have overlooked, and represent you during a tax audit.

Learn more about how to find, hire, and work with an accountant . And when you’re ready to outsource your bookkeeping, try Bench .

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Small Business Tax Prep

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April 12, 2021

Block Advisors

Maximizing your business travel tax deductions

April 12, 2021 • Block Advisors

Each year as tax day approaches, the hunt to find additional tax deductions to lower your taxable rate as a small business owner is on. Believe it or not, business travel deductions offer a way to reduce your net earnings, but they come with a lot of rules. Read on and you’ll find tax rules on deducting business travel expenses.

Defining business travel expenses

Business travel expenses are travel costs associated with running a business, or costs incurred when you are away from your principle place of business (called your tax home). Your home office, downtown office space, or where you live if you have multiple stores could be considered a tax home. There are special tax rules for having more than one place of business, no regular place or business, or a temporary assignment.

Many small business travel expenses are tax-deductible. They don’t include personal expenses or ones used to determine your business’ cost of goods sold. Trips for pleasure can never be deducted.

Pro tip: If a family member travels with you, you can’t claim any deduction for their expenses. For the travel expenses of the family member to be deductible, they should be an employee of the business.

What are the tax rules for deducting small business travel expenses?

The general rule for deducting business travel expenses is that it must be ordinary and necessary.

• An ordinary business travel expense means the expense is typical in your line of business or industry.
• A necessary expense is one that is appropriate and helpful for your business.

Whether an expense is ordinary and necessary depends on facts and circumstances, which vary based on your job role and industry. So, if you are looking to deduct a shopping excursion for new attire to wear on an important business trip… You probably want to think twice as neither the shopping trip nor the purchase of everyday clothing count for deductions.

The ordinary and necessary principle can help make a better decision on whether your small business travel expenses are deductible.

Items that qualify as business travel deductions include:

• Air travel and pre-check
• Conferences
• Shipping of baggage or trade show material
• Dry cleaning and laundry while on a business trip
• The airport or train station and your hotel
• The hotel and the work location
• Tips paid during your business excursion
• Business calls – fax, cell, or landline
• Using your personal car while on a business trip 2
• Technology – computer rental or wireless fees

Learn about temporary rules that allow you to deduct 100% of your food and beverage expenses for 2021 to 2022.

What about deducting international business travel?

If part or your full trip is outside the country, the IRS rules differ and some of your deductions for the cost of getting to and from the destination may be limited if you spend time on personal activities during the trip. For a longer trip, your international travel is considered business-related and deductible if you were outside the U.S. for more than a week and 25% or less of the time abroad was spent on personal activities. In other words for a trip longer than a week to be expensed, you must spend 75% of the trip time on business related matters.

Best practices for taking small business travel deductions

There are best practices for taking small business travel deductions. While traveling away from your place of business, keep records of all expenses incurred and any advances received, and keep all receipts. Records should be kept in case a deduction is questioned by the IRS and to substantiate the numbers on your tax return.

It can get confusing whether certain travel expenses are deductible or not. As a taxpayer, your role is to properly report and track potentially deductible expenses.

If you need help determining what travel deductions you can make, look to a Block Advisors certified small business tax pro . Not only can we help manage your taxes year-round, but we also have the bookkeeping tools and services to keep you on track, ensure your books are accurate and you can focus on what you love (which is probably not taxes).

Where to show business travel expenses on your tax return

Where you show qualified business travel expenses depends on your business entity .

• Corporations report the small business expenses in the “Deductions” section of  IRS Form 1120 .
• Multiple-member LLCs and partnerships should report expenses in the “Deductions” section on  Form 1065 .
• Single-member LLCs and sole proprietors should report the business travel expenses in the “Expenses” section of  Schedule C .

Help with deducting business travel expenses

If you’re still not sure about what you can and can’t deduct, don’t sweat it. Get help.

When you use a small business certified tax pro at Block Advisors, you can rest assured we’ll help you claim all of the self-employed tax deductions you are entitled to – from travel to everyday business expenses.

Let our tax pros help with services like tax preparation, payroll, and bookkeeping. Our team is your team. 

Make a tax appointment .

1 Instead of keeping records of your meal expenses and deducting the actual cost, you can generally use a standard meal allowance, which varies depending on where you travel. The deduction for business meals is generally limited to 50% of the non-reimbursed cost. Certain business meals will be 100% deductible in 2021 and 2022.

2 You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.

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Quick Summary

What llc expenses can you write off, 1. expenses of starting a business, 2. home office expenses, 3. business use of your car, 4. business meals, 5. travel expenses, 6. education expenses, 7. business interest and bank fees, 8. medical expenses, 9. advertising and promotion, 10. business insurance, deductions tailored to your business: unlocking industry-specific tax benefits for your llc, the power of industry knowledge, conducting an industry-specific tax analysis, stay up-to-date, a case study: my effective tax planning in action, llc tax deductions (what expenses can you write off).

As a limited liability company (LLC), understanding which expenses you can write off is crucial for maximizing your tax savings and optimizing your business finances.

Drawing from my experience as an expert in business management, I’ll share my insights on tax deductions by providing examples of deductible expenses applicable to LLCs.

Did you know that the way you structure your LLC can dramatically change your tax obligations?

Let's explore how you can leverage this to your advantage.

• The expenses that can be written off for an LLC  are related to owners home office setup, including rent or mortgage interest, phone, internet, and utility bills.
• LLCs can deduct a portion of their business expenses to reduce their taxable income, resulting in potential tax savings.
• The IRS typically permits deducting up to 50% of business meal expenses.
• I believe that understanding and utilizing tax deductions for LLCs is crucial for optimizing financial stability and minimizing tax burdens, marking it as a smart financial strategy for business owners.

When managing your expenses, you must be aware of potential write-offs that can significantly impact your financial situation.

Here are the expenses you can write off:

Starting a business involves various expenses. LLC set-up costs are categorized as capital or operating expenses.

Capital expenses are those costs associated with the start-up and expansion of a business.

On the other hand, operating expenses are those incurred to run a business's day-to-day operations.

Such expenses could be written off in the tax year you incur them, even if you only pay them the following year.

However, costs must be claimed in full for the current taxable year and not be part of an accrual system or another method that defers expenses to an earlier period. The costs of starting a business in an LLC are no different.

Business income is categorized as self-employed income, which differs from income earned as an employee. This means that owners must pay self-employment taxes on their income.

Businesses can deduct their business expenses from their income to reduce their taxable income.

This can help lower the amount of self-employment taxes that are owed.

Business owners should keep track of their business-related expenses including the cost of equipment, advertising, and travel.

If you use your car for business purposes, you can write it off on your taxes.

As of 2021, the IRS allows LLC owners to deduct 56 cents per mile for business driving, emphasizing the need for accurate mileage tracking and record-keeping.

There are a few things to keep in mind when deducting car expenses [ 1 ]:

• The car must be used primarily for business purposes
• You must keep track of the miles driven for business purposes
• You can only deduct the percentage of the car expenses related to business use
• You can't deduct any expenses related to commuting

To write off a car on your taxes, you must keep track of the number of miles driven for business purposes each year.

Since this information changes from person to person and company, it is best to speak with a tax professional. You can only deduct the percentage of the car expenses related to business use.

Business meals can be a part of LLC tax deductions, but there are some things to remember. The Internal Revenue Service (IRS) allows LLCs to deduct a portion of these meal expenses as legitimate business expenses.

It's important to note that not all expenses associated with business meals are fully deductible. The IRS generally allows a qualified business income deduction of up to 50% of the total meal expense, according to the H&R Block [ 2 ].

However, there are specific criteria that need to be met to claim this deduction as below:

• The meal must be ordinary and necessary for your business
• You need to maintain proper documentation for the business meal
• The deduction should apply to meal costs only and does not cover entertainment expenses like tickets to shows or sporting events

Travel expenses can be an expensive part of owning a business, but they are often tax-deductible.

Internal Revenue Service rules require employees to keep track of their travel expenses and fill out Form 2106 if they wish to claim deductions [ 3 ].

The IRS allows business owners to deduct travel expenses in certain circumstances.

The most common way to claim a tax deduction for travel expenses is the actual expense method. This means you can only deduct the amount exceeding your expenses by 2% of your adjusted gross income.

You must track all your costs, including airfare, hotel, rental cars, parking fees, and gas.

You cannot deduct meals or entertainment from the IRS, but you can claim a meal deduction if you travel away from home overnight [ 4 ].

To claim a tax deduction for your travel expenses, you must have records of every expense paid during the year.

IRS rules allow businesses to deduct employee education and training programs, including tuition, books, supplies, and other related costs.

These expenses must be for education in your current trade or business or to improve skills required in that recent trade.

IRS rules also state that education cannot prepare someone for a new business, occupation, or job.

A common IRS rule is that an employee's education expense is tax-deductible when that education meets at least one of the following IRS criteria:

• Education maintains or improves skills needed in your current job
• Education is required by law or regulations for your present work
• Your present employer or the IRS requires education to keep your salary, status, or job
• The education is part of a program that will qualify you for a new business or occupation, even if you don't intend to enter that business or occupation

Another common expense for LLCs is bank fees and interest. Many business owners need to be made aware these expenses can be written off on their taxes.

Bank fees and interest payments related to the operation of your business are tax-deductible.

To claim this tax deduction, you must have records of the amount of interest you paid and the number of bank fees you paid during the year.

If you have a home office that you use for your business, some or all of your mortgage interest can also be deducted from Schedule C. The IRS allows business owners to deduct 100% of their business interest.

Another common expense for LLCs is medical insurance premiums.

IRS rules allow businesses to deduct insurance premiums paid by the company on behalf of its employees.

The insurance must be qualified under the Internal Revenue Code Section 419A and meet IRS requirements [ 5 ]. A qualified plan includes insurance for medical care of yourself, your spouse, and your dependents.

This insurance may also cover accidents or long-term care. To claim this tax deduction, you must file IRS Form 8929 as an attachment to Schedule C. You report the total insurance cost on line 12 of Form 1040 and deduct it from your income taxes.

"You can deduct all the insurance premium payments from your tax return. In addition, if your medical expenses add up to more than 7.5% of your adjusted gross income, you may be able to write some of them off on your taxes." - Sandra Habiger, Certified Public Accountant

In most limited liability companies (LLCs) , advertising and promotion expenses are taxable. This means the company must pay taxes on these expenses like any other business expense. However, a way to write off these expenses in an LLC is through legal fees.

When you create an LLC , you must file LLC articles of organization with your state.

Along with the articles, you must also file an LLC operating agreement. This document is your company's bylaws, outlining how the company will be run.

The LLC operating agreement should include a section on advertising and promotion expenses. This section should specify that these expenses are tax-deductible.

If the IRS ever audits you, you must provide copies of your articles of organization and LLC operating agreement to prove that these expenses are tax-deductible.

Keeping these documents on file ensures that your advertising and promotion expenses are written off correctly.

Business Insurance can be a great way to protect your business in the event of an unexpected occurrence.

However, when operating as an LLC, you may have some instances where you can write off your insurance premiums.

First, when using the insurance to protect an asset owned by the LLC and if the LLC is being used as a contractor.

In this case, the premiums can be deducted as a business expense as long as the insurance policy covers any liabilities that may arise from work being done.

The final instance is if a partner or a member of the LLC has purchased an insurance policy.

To deduct the premiums, you have to provide specific documentation showing who purchased the insurance and for what it was purchased.

Related Articles:

• How to Avoid & Reduce Self-Employment Tax
• Tax Loopholes the Rich Don't Want You to Know

When it comes to maximizing your LLC's tax deductions, one size doesn't fit all. Your industry can play a significant role in determining which deductions are available to you.

Below, I will delve into the world of industry-specific deductions, revealing how your LLC can take advantage of these tailored tax benefits.

As a savvy LLC owner, you're likely already aware that the tax code is a complex maze. However, what many entrepreneurs overlook is the fact that the tax code contains specific provisions that cater to different industries. These provisions are designed to support businesses in various sectors and encourage growth.

Examples of Industry-Specific Deductions

To illustrate the point, let's consider a few examples:

• Restaurants and Hospitality : If you run an LLC in the restaurant or hospitality industry, you may be eligible for deductions related to food and beverage costs, employee meals, and even renovation expenses. These deductions can significantly reduce your taxable income.
• Technology and Innovation : Tech-based LLCs can benefit from deductions related to research and development (R&D) expenses. These deductions can incentivize innovation and technological advancements within your business.
• Real Estate : If your LLC operates in the real estate sector, you can explore deductions related to property depreciation, mortgage interest, and property management expenses. These deductions can make a substantial difference in your bottom line.

To make the most of industry-specific deductions, it's crucial to conduct a thorough analysis of your business's operations. Consider consulting with a tax professional who specializes in your industry. They can help you identify deductions that are often overlooked.

Tax laws and regulations can change, and industry-specific deductions may evolve over time. It's essential to stay informed about any updates or changes that could impact your LLC's tax strategy. Regularly check with industry associations and government sources for the latest information.

When I first established my digital marketing LLC, I quickly learned that effective tax planning was key to maximizing financial efficiency as we faced significant startup costs, including technology investments and office setup expenses.

Recognizing the potential for tax deductions, I meticulously documented every expense, which included $5,000 on computers and software and an additional $3,000 on office furniture and equipment.

To optimize our tax savings further, I decided to take advantage of the IRS's Section 179 deduction, which allowed us to fully deduct the total cost of qualifying equipment purchased or financed during the tax year . By applying this strategy, we were able to deduct the entire $8,000 in the first year itself rather than depreciating these assets over several years.

Additionally, we spent around $2,000 on marketing and $1,500 on legal fees for trademarking and contracts. Both expenses were fully deductible, as they were ordinary and necessary for running the business.

By the end of the year, these strategic deductions helped reduce our taxable income by over $11,500, which translated into significant tax savings and enhanced our cash flow, enabling further investment into growing the business.

How Much Can You Write Off with an LLC?

The amount you can write off with an LLC has no limit. The write-off amount depends on the nature of business expenses, their connection to your LLC's activities, and applicable tax laws.

Can My LLC Pay My Rent?

Your LLC can pay your rent. As long as the expenses are necessary for the operation of your business, they are considered tax-deductible. One thing to keep in mind is that you cannot deduct the personal portion of the rent.

What Expenses Need to Be Included with LLC Tax Deductions?

Expenses that can be included with LLC tax deductions typically encompass business-related costs. These may include capital, car, office rent, employee salaries, advertising, and professional services. However, there are certain expenses you can leave out in your gross revenue.

References:

• https://www.thebalancemoney.com/business-driving-expenses-you-can-and-can-t-deduct-398677
• https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/business-meal-deductions/
• https://www.irs.gov/instructions/i2106
• https://www.irs.gov/publications/p463
• https://www.law.cornell.edu/uscode/text/26/419A

About The Author

Jon Morgan is the CEO and Editor-in-Chief of Venture Smarter, a leading consulting firm that specializes in helping startups and small businesses scale and grow.

With over 10 years of experience in the industry – working with both early-stage startups and large corporations – Jon has a wealth of knowledge and expertise in areas such as strategic planning and management, market research, finance, sustainability, technology, entrepreneurship, and financial analysis.

Born and bred in California where he got his degree in business management at University of California, Davis, Jon also earned a Master's degree in Business Administration (MBA) from Harvard Business School in 2010.

In addition to his consulting work, Jon is also a sought-after speaker and author, sharing his insights on business growth and success with audiences around the world.

A father of two and a loving husband, Jon is also a certified fur dad to their poodle Sophie. In his downtime, he is committed to mastering Spanish as a second language.

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5 thoughts on “ llc tax deductions (what expenses can you write off) ”.

If my LLC is paid $4500 in a tax year, can I avoid paying taxes on it by purchasing $4500 in work related equipment for said LLC?

Yes, purchasing $4500 in work-related equipment can offset your $4500 income if it qualifies as a necessary business expense. This reduces your taxable income to zero for that year, assuming no other income or expenses. Remember to verify that your purchases qualify under IRS rules like Section 179 or bonus depreciation.

Can you provide good tax accountants in California to help with small business write offs and credits?

I own a cleaning company- LLC. As of right now I am the only one employed under this LLC. I am wondering if I can write off my gym membership? I see this as a needed expense as it keeps me fit so I am able to be active and clean homes. I also would love to offer this as a benefit to future hires and use it as a tax write off. Thoughts?

Typically, gym memberships are not considered deductible business expenses for tax purposes because they are seen as personal expenses. The IRS generally does not allow deductions for gym memberships just because physical fitness is beneficial to business activities. To offer it as a benefit to employees and deduct it, you would need to establish a formal employee wellness program that meets specific IRS criteria.

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Forming your own company comes with many important decisions, like what type of business entity best suits your needs. If you’re the owner of your business and will not be sharing those ownership responsibilities with any other individuals, you might want to consider forming a limited liability company — specifically, a single-member LLC.

Single-member LLCs enjoy many tax benefits and flexibility in operations. To help you find out if this business entity type is right for you, we’ll walk you through everything you need to know about single-member LLCs, show you how to set one up and answer questions regarding their taxes and employees.

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What is a single-member LLC?

A single-member LLC is a limited liability company, or LLC, that is owned by one individual, called a member. This means one person holds all of the responsibility of managing the company and paying necessary taxes.

A single-member LLC differs from a standard or multi-member LLC in that it has a single owner as opposed to two or more.

Many freelancers who decide to start their own businesses opt for single-member LLCs because this business structure allows them to expand and add employees and contractors as they see fit.

How to set up a single-member LLC

You’ll set up a single-member LLC through the secretary of state where your business is located by completing the following steps.

Choose an LLC name

The first step you’ll take when setting up a single-member LLC is deciding on a company name . It’s important to pick a name that best represents your business but also complies with your state laws.

Many states prohibit using words that could be deemed offensive or derogatory, as well as words such as “bank,” “credit union” and “mutual” that require further regulation. You’ll also need to select a unique name that no other business has already claimed.

It’s best to make a list of possible names, then run them through your state’s business entity database to find an available name. From there, you can reserve your name (typically for up to 120 days) and file any trade or assumed names your business might need.

You can also trademark your single-member LLC name federally through the United States Patent and Trademark Office and locally through your state government.

Designate a registered agent

Next, you’ll need to choose a registered agent to receive paperwork and communications from the state government on behalf of your business. This is required in order to officially register your single-member LLC.

Each state has its own requirement for registered agents, but generally, your agent must be over 18, reside in the state your LLC is registered within and be available during normal business hours. You can also typically partner with a business entity located in your state.

Most states will allow the owner of a single-member LLC to act as their own registered agent. Although this might work well for many LLC owners, be aware that acting as your own registered agent comes with a few disadvantages. They include:

Being available at your registered address during regular business hours: If you plan on working in the same location during these hours, this may not be an issue.

Disclosing some of your personal information: Registered agents must disclose some private information as a matter of public record.

Accepting summons and subpoenas at your place of business: If you do not have clients visiting your office, this might be fine, but be aware that legal communications will be served directly to you.

For these reasons, many single-member LLCs opt to partner with an outside registered agent to handle business communications on their company’s behalf.

Obtain proper licenses and permits

In order to establish a business, many states require single-member LLCs to obtain a general business license . In addition, depending on your industry, your LLC may also need to secure additional licenses or permits (such as a license to sell alcohol).

Some cities and counties also require businesses to obtain specific licenses or permits to operate. Make sure you check with your local government branch to adhere to local requirements, as well as state regulations.

Register your LLC

Once you’ve completed the first three steps, you’ll be ready to officially register your single-member LLC with the state government. To do this, you’ll file your articles of organization (some states might refer to them as your articles of formation).

This process can be completed online, by mail or even in person — depending on the state. There is typically a fee associated with filing this paperwork.

To file your articles of organization, you’ll generally need the following information:

Your official LLC name.

Your operating address.

Your registered agent’s name and address.

Your LLC purpose.

Your industry.

Your (the owner’s) name and address.

Filing this paperwork online is typically the quickest way to establish your new LLC. Some requests can be processed within 24 to 48 hours, depending on your state.

Create an operating agreement

Creating an operating agreement is an important step that all single-member LLCs should take. Although most states do not require single-member LLCs to draft or file an operating agreement with the government, this document can be extremely important for protecting your business.

An operating agreement details the ownership and management structure of your LLC, outlines partner investments and distributions and provides an overview of the operational plan for your business. Even though single-member LLCs will not need to worry about detailing partner distribution percentages, this document is still important to create.

An operating agreement can benefit your single-member LLC by:

Confirming your LLC status.

Making it easier to open business financial accounts.

Protecting your personal liability.

Allowing your business to operate per your operational plan in the event that you’re incapacitated or unable to run your company for a period of time.

You can partner with a business attorney or use professional templates offered by business services to complete your operating agreement. It should be kept on file at your office.

» MORE: Best LLC business loans

Single-member LLC taxes

Now that you know how to form a single-member LLC, let’s explain how single-member LLCs pay taxes.

Single-member LLCs are considered pass-through entities, which means the profits are passed on to the owner. Therefore, single-member LLC taxes will not require owners to pay corporate taxes, but instead, claim profits and losses on their personal tax returns.

That said, like any LLC, a single-member LLC does have the option to elect to be taxed as a corporation by filing Form 8832 with the IRS.

Obtaining an EIN

An EIN, or employer identification number, is issued by the IRS to businesses. Your EIN works similar to an individual’s social security number — it clearly identifies your business and allows you to open business accounts and pay employees and taxes.

Single-member LLCs may need to obtain an EIN. You’ll need to obtain an EIN if:

You have employees or contractors to pay.

Your bank requires an EIN for a business bank account.

Single-member LLCs without employees may not need to obtain an EIN, but there are benefits of doing so — like separating your personal and business finances. If you opt not to secure an EIN, you’ll pay taxes through your social security number on your personal tax return.

You can request an EIN online with the IRS . The application only takes a few minutes and your EIN will be available immediately.

Employment taxes

Any single-member LLC with employees will need to pay employment taxes, also called payroll taxes. You’ll do this by setting up a withholding account with your state Department of Revenue.

This will allow your LLC to withhold federal and state payroll taxes from your employees.

Self-employment tax

As the owner of the LLC, you will not be considered an employee of your business and are therefore subject to self-employment taxes.

These taxes are due quarterly at both the state and federal level . You can estimate them on your own or partner with an accountant or tax specialist.

If your single-member LLC will be collecting sales tax, you’ll need to apply for a sales tax license in your state (if applicable). This will allow you to pay the state government any sales tax your LLC collects.

» MORE: Business insurance for LLCs

Is a single-member LLC worth it?

There are many good reasons to form a single-member LLC, but this business structure is not right for everyone. Here are some pros and cons to help you decide if this entity type is right for your company.

Liability protection.

Separation of business and personal finances.

Recognition as an established business.

Can choose how you want to be taxed.

Option to add new members or pass on ownership to others.

Formation process requires paperwork and associated fees.

Must meet compliance, recordkeeping, and other ongoing state requirements.

Some courts hold that single-member LLCs are not separate entities and do not award owners liability protection in the case of debts or lawsuits.

Frequently asked questions

Can a single-member llc have employees.

Yes, single-member LLCs can, and often do, have employees. Many think because of the term “single-member” this type of LLC is for companies of one; however, this term actually refers to a single owner.

Single-member LLCs with employees do have different requirements, however, such as obtaining an EIN and setting up payroll withholding accounts.

Does a single-member LLC need an EIN?

It depends. A single-member LLC does not always need an EIN, particularly if the LLC does not have any employees. In this case, the LLC owner would file taxes under their social security number rather than an EIN.

If a single-member LLC has employees, an EIN is required. Some single-member LLCs without employees also opt to obtain an EIN since it’s free and makes it easier to secure business financial accounts and separate personal and company finances.

Is a single-member LLC a sole proprietorship?

No, a single-member LLC differs from a sole proprietorship . Although like a sole proprietorship, a single-member LLC is a pass-through entity (where taxes pass through the company to the owner), a sole proprietorship is a much more simplified business structure.

Unlike a single-member LLC, a sole proprietorship does not need to be registered with the state — and therefore has no legal separation between the business and the owner. As an example, if you begin freelancing or working for yourself without setting up a business entity, you’re automatically running a sole proprietorship.

Use our guide to learn more about the differences between an LLC vs. sole proprietorship .

How do you pay yourself in a single-member LLC?

As the owner of a single-member LLC, you won’t receive a paycheck. Instead, you’ll pay yourself by withdrawing money from your company’s profits.

You’ll decide on the amount to withdraw, then either write yourself a check or transfer money from your LLC business bank account to your personal bank account.

Many single-member LLC owners opt to pay themselves a steady salary or percentage of gross profits.

Are single-member LLCs subject to double taxation?

No, single-member LLCs are taxed as pass-through entities — and as a result — avoid paying corporate taxes. These businesses only pay taxes on their company profits once, on their personal tax returns.

Single-member LLCs will only be subject to double taxation if they’ve elected to be taxed as a C corporation by filing Form 8832 with the IRS.

The bottom line

Forming a single-member LLC can help small businesses with one owner enjoy liability protections and tax benefits. The business formation process is fairly simple, usually taking anywhere from a few days to a few weeks, depending on your state.

We recommend reviewing all of your business entity options before deciding on a single-member LLC and reaching out to a business attorney with any questions you may have.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

3 Single Member LLC Tax Write-Offs You Should Know About

• posted by gbs
• May 16, 2023

Understanding tax write-offs is essential when maximizing tax savings for your single-member LLC. Dealing with taxes as a business owner can be intimidating, but when you have the correct information and plan appropriately, you can considerably lessen your taxable income.

So what are the primary tax write-offs you should know about as a single-member LLC business owner? Read on to discover how you can potentially save thousands in taxes annually by deducting these three common things.

1. Home Office Deduction

As a single-member LLC, one of the most significant tax write-offs you can take advantage of is the home office deduction .

Deducing your home office expenses allows you to claim a portion of your home expenses as business deductions on your taxes, potentially saving you thousands each year. 

So how do you know if your home office qualifies and how much you can deduct?

Determine if You Qualify for the Home Office Deduction

To qualify for this deduction, two main requirements must be met:

• Your home office space must be used exclusively and regularly for business activities.
• The space must also be your principal place of business or where you meet with clients or customers while running your single-member LLC.

Choose Between Two Calculation Methods: Simplified vs. Actual Expenses Method

You have two options when calculating your home office deduction: the simplified method and the actual expenses method.

• Simplified Method: With this approach, you multiply $5 by the square footage of your dedicated home office space (up to a maximum area of 300 square feet). The resulting amount is then deducted from your taxable income. For example, if your office is 200 square feet, this approach could result in a deduction of $1,000 ($5 multiplied by 200).
• Actual Expenses Method: This option involves tracking all relevant costs associated with maintaining and operating your workspace throughout the year. These expenses include mortgage interest or rent payments, property taxes, utilities like electricity and water, repairs and maintenance costs, insurance premiums, depreciation on the portion of your home used for business, and more. You then calculate the percentage of these expenses that are attributable to your home office based on its square footage relative to the total area of your residence.

While the simplified method is easier and requires less record-keeping, using actual expenses can potentially result in a larger deduction, especially if you have high housing costs or extensive workspace-related expenditures.

Maintain Accurate Records

Maintaining accurate records throughout the year is a must for ensuring you can deduct the maximum amount possible for your home office. Keep track of all relevant receipts and invoices related to both direct (workspace-specific) and indirect (shared household) expenses. This documentation will be invaluable when filing your taxes and defending any potential audits by the IRS.

Key Takeaway: 

As a single-member LLC owner, you can use the home office deduction to claim a portion of your home expenses as business deductions. To qualify for this deduction, your home office space must be used exclusively and regularly for business activities. You have two options when calculating your home office deduction: the simplified method and the actual expenses method. You should keep track of receipts and expenses for both.

2. Business Expense Deductions

Business expenses are deductions that can lower your taxable income. When tracking these expenses, it’s essential to understand what qualifies as a deductible expense for your business.

Ordinary and Necessary Expenses

The IRS allows businesses to deduct ordinary and necessary expenses , which are costs that are both common in your industry and helpful for running your business. Some examples include:

• Office supplies
• Rent or lease payments for office space or equipment
• Utilities (electricity, water, gas)
• Advertising and marketing costs
• Insurance premiums related to the business operations
• Maintenance costs for equipment or property used in the business

Travel & Meal Expenses

Single-member LLCs can also deduct travel and meal expenses incurred while conducting business. However, it’s important to follow specific rules set by the IRS when claiming travel and meal deductions.

Starting in the tax year 2018 and beyond, entertainment expenses are no longer deductible.

• Travel: You can deduct transportation costs such as airfare or mileage if the trip is primarily for business purposes.
• Meals: While on a business trip or meeting with clients and customers, you can generally deduct up to 50% of your meal cost.

To ensure compliance with IRS guidelines, it’s crucial to maintain detailed records of your travel and meal expenses. This includes keeping receipts and documenting the business purpose for each expense.

Vehicle Usage Deductions

If you use a vehicle exclusively or partially for your single-member LLC business operations, you can claim deductions related to its usage. There are two methods for calculating this deduction:

• Standard Mileage Rate : Multiply the total business miles driven by the IRS-approved standard mileage rate (58 cents per mile in 2023).
• Actual Expense Method : Calculate and deduct the actual expenses incurred while using your vehicle for business purposes, such as gas, maintenance costs, insurance premiums, and depreciation.

To maximize your tax savings, compare both methods and choose the one that provides the highest deduction amount. Remember to keep accurate records of your mileage and other expenses throughout the year.

By understanding these various deductible business expenses available to single-member LLCs, you can take advantage of valuable tax write-offs that can help lower your taxable income and save money on taxes. Consult with a qualified tax professional or accountant like Scharf Pera & Co., PLLC , if you have any questions about claiming deductions specific to your situation.

As a single-member LLC, you can reduce your taxable income and save money by taking advantage of deductible business expenses such as office supplies, rent or lease payments for equipment or space, utilities, advertising costs, insurance premiums, and maintenance costs. You can also deduct travel and meal expenses incurred while conducting your business. Additionally, if you use a vehicle exclusively or partially for your business operations, you can claim deductions related to its usage using either the standard mileage rate or the actual expense method.

3. Retirement Plan Contributions

Did you know retirement plan contributions can be business deductions? This section will discuss the benefits of contributing to various retirement plans and how they can help you save on taxes as a single-member LLC.

Traditional IRA

A Traditional IRA is an individual retirement account that allows you to make pre-tax contributions, which can lower your taxable income for the year. For 2023, the max contribution amount is $6k (or $7k if you’re 50+). If you are covered by a workplace retirement plan, such as a 401(k), contributions to your traditional IRA may not be fully deductible.

Unlike a traditional IRA, a Roth IRA allows after-tax contributions but offers tax-free growth and withdrawals during retirement. While there are no immediate tax deductions from contributing to a Roth IRA, it provides more flexibility in terms of accessing funds without penalties compared to other types of accounts.

SEP-IRA (Simplified Employee Pension)

If you want higher contribution limits than what’s available through IRAs and additional benefits specifically designed for small business owners like yourself, consider opening a SEP-IRA . This type of account enables single-member LLCs with no employees (other than themselves) to contribute up to 25% of their net earnings from self-employment, up to a maximum of $58,000 for 2023. Contributions to a SEP-IRA are tax deductible and can help lower your taxable income.

Solo 401(k)

Another excellent retirement plan option for single-member LLCs is the Solo 401(k), also known as an Individual or One-Participant 401(k) . This plan allows you to contribute both as an employee (up to $19,500 in 2023) and employer (up to 25% of your net earnings), with a combined limit of $58,000 ($64,500 if age 50 or older). The Solo 401(k) offers higher contribution limits than traditional IRAs and provides additional flexibility regarding loans and investment options.

To maximize your retirement savings while taking advantage of these tax benefits, consulting with a professional experienced in small business taxation is essential.

As a business owner, you can utilize retirement plan contributions to maximize your savings and reduce taxable income. Options for single-member LLC proprietors to maximize savings and minimize taxable income include traditional IRAs, Roth IRAs, SEP-IRAs, and Solo 401(k)s. Consult with a professional specializing in small business taxation to determine which plan best suits your needs based on your income and goals.

Frequently Asked Questions About Single-Member LLC Tax Write-Offs

How much can a single-member llc write off.

A single-member LLC can write off various expenses related to the business, such as home office deductions, business expenses, and retirement plan contributions. The amount of these deductions depends on the specific costs incurred by the business owner during the tax year. 

How do write-offs work for a single-member LLC?

Write-offs reduce taxable income for a single-member LLC by allowing owners to deduct eligible business-related expenses from their gross income. These include operating costs like rent or mortgage interest, utilities, supplies, and equipment purchases. To claim these deductions, maintain accurate records of all relevant transactions throughout the year.

What are the benefits of LLC tax write-offs?

Tax write-offs benefit an LLC by lowering its taxable income and reducing overall taxes owed. This allows small businesses to reinvest more funds into growing their operations while minimizing financial burdens associated with taxation.

How do I maximize my LLC tax deductions?

To maximize your LLC’s tax deductions:

• Maintain detailed records of all business-related expenses
• Fully utilize home office deduction, if applicable
• Deduct allowable business expense categories
• Increase retirement plan contributions, if possible

As a single-member LLC, it’s important to know the tax write-offs available to you. By maximizing your home office deduction, taking advantage of business expense deductions, and utilizing retirement plan contributions, you can reduce your taxable income and save money on taxes.

Remember that these deductions are only applicable for expenses related to business purposes and should be properly documented. It’s recommended to consult with a professional tax advisor or accountant when filing taxes as a single-member LLC.

If you’re looking for more guidance on managing your finances as a small business owner or need assistance with tax planning and preparation, contact Scharf Pera & Co., PLLC , today. Our team of experienced professionals can help ensure that you’re making the most out of your tax write-offs as a single-member LLC.

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Taxpayers Guide to LLCs and S Corps

Introduction.

• About the Author
• Progressive Updates
• Introduction Disclaimer
• Shameless Self-Promotion
• Book Introduction
• Quick Reference 2023
• Quick Reference 2024

Chap 1 - Business Entities, LLCs

• Basic Business Entities
• Sole Proprietorship
• Single Member Limited Liability Company
• Multi-Member Limited Liability Company
• Partnerships
• Being Considered a Passive Business Owner
• Rental Partnerships
• C Corporations
• Personal Service Corporation
• Professional Corporations and LLCs
• S Corporations
• Section 199A Qualified Business Income Tax Deduction
• S Corp Versus LLC
• LLC Popularity (Hype)
• Formation of an LLC or S Corp
• Nevada Fallacy of an LLC (or Delaware or Wyoming!)

Chap 2 - Customized Entity Structures

• Your Spouse as a Partner (Happy Happy Joy Joy)
• Family Partners
• Real Estate Holding Company and Operating Company
• Parent-Child Arrangement (Income Flows "Up")
• Parent-Child Arrangement (Income Flows "Down")
• Multi-Member LLC That Issues Invoices
• Things to Work Through with Multiple Entities
• Recap of Benefits with Multiple Entities
• State Apportionment with Multiple Entities
• California Multi-Member LLC S Corp Twist
• Holding Company versus Management Company
• Economic versus Equity Interests
• Structuring Deals with Angel Investors
• ESOPs and S Corporations
• Another Employee Ownership Situation
• Medical C Corp
• Fleischer Tax Court Case
• Joint Ventures
• Loans or Capital Injections
• Using a Trust in Your Formation Considerations
• Operating Agreements
• Exit Plans, Business Succession
• Liability Protection Fallacy of an LLC
• Charging Orders
• Using a Self-Directed IRA to Buy a Rental, Start A Business

Chap 3 - S Corporation Benefits

• Avoiding or Reducing Self-Employment SE Taxes
• Tax Savings with Health Insurance
• S Corp Hard Money Facts, Net Savings
• Ancillary Benefits with S Corporations
• Officer Compensation with Solo 401k Plan Deferral
• W-2 Converted to 1099
• Net Investment Income, Medicare Surtax and S Corps
• Being a Passive Business Owner
• Three Types of Income

Chap 4 - The 185 Reasons to Not Have an S Corp or LLC

• Chapter 4 Introduction
• Additional Accounting Costs
• Additional Payroll Taxes
• SEP IRA Limitations
• Trapped Assets
• Distributing Profits, Multiple Owners
• Other W-2 Income
• State Business Taxes (Not Just Income Taxes)
• Deducting Losses, Trapped Cash
• Distributions in Excess of Shareholder Basis
• Stock Classes
• Vesting and Expanding Ownership
• Bad Loans to the S Corp
• Social Security Basis
• Payroll Taxes on Children
• C Corp to S Corp Problems
• Going Concern
• Recap of S Corp Downsides
• Growing Business, Debt Service

Chap 5 - State Nexus Problems

• Chapter 5 Introduction
• Chapter 5 Disclaimer
• Wayfair Case Part 1
• Nexus Theory
• Constitutional and Legislative Standards
• Sales and Use Tax, Income Tax
• Physical and Economic Presence, Nexus Attached
• Wayfair Case Part 2
• Services and Tangible Personal Property (TPP)
• Costs of Performance, Market-Based Approach
• Allocation and Throwback
• FBA, Drop Shipments, Trailing Nexus Revisited
• Recap of State Tax Issues
• State Tax Issues and Nexus

Chap 6 - S Corporation Election

• Formation (Election) of an S-Corp
• Electing S-Corp Filing Status, Retroactive for 2023
• Another Option, Dormant S Corp
• Missing Payroll, Now What
• Mid-Year Payroll
• Nuts and Bolts of the S Corp Election
• Ineffective S Corp Elections
• S Corp Equity Section
• Terminating S Corp Election
• Distributed Assets
• 5 Year Rule
• Life Cycle of an S Corporation

Chap 7 - Section 199A Deduction Analysis

• Section 199A S Corp Considerations
• Calculating the Qualified Business Income Deduction
• Section 199A Defining Terms
• Specified Service Trade or Business (SSTB) Definitions
• Trade or Business of Performing Services as an Employee
• Services or Property Provided to an SSTB
• Section 199A Deduction Decision Tree
• Section 199A Reasonable Compensation
• Section 199A Pass-Thru Salary Optimization
• Cost of Increasing Shareholder Salary
• Section 199A Rental Property Deduction
• Negative Qualified Business Income
• Qualified Property Anti-Abuse
• Aggregation of Multiple Businesses
• Section 199A W-2 Safe Harbors
• Additional Section 199A Reporting on K-1
• Section 199A Frequently Asked Questions

Chap 8 - Section 199A Examples and Comparisons

• S Corp Section 199A Deduction Examples
• Section 199A Side by Side Comparisons
• Section 199A Basic Comparisons
• Section 199A Health Insurance Comparison
• Section 199A 200k Comparison
• Section 199A 250k Comparison
• Section 199A Specified Service Business Comparison Part 1
• Section 199A Specified Service Business Comparison Part 2
• Section 199A Phaseout
• Section 199A Recap
• Section 199A Actual Tax Returns Comparison

Chap 9 - Reasonable Shareholder Salary

• Chapter 9 Introduction
• IRS S Corp Stats
• Reasonable S Corp Salary Theory
• IRS Revenue Rulings and Fact Sheet 2008-25
• Tax Court Cases for Reasonable Salary
• Risk Analysis to Reasonable Shareholder Salary
• Reasonable Salary Labor Data
• Assembled Workforce or Developed Process Effect
• W-2 Converted to 1099 Reasonable Salary
• S Corp Salary Starting Point
• Multiple Shareholders Payroll Split
• Additional S Corp Salary Considerations
• Reasonable Salary Recap

Chap 10 - Operating Your S Corp

• Chapter 10 Introduction
• Costs of Operating an S Corp
• New S Corp Puppy, What Do I Do Now
• Accounting Method
• 1099-NEC Issued to Your SSN
• Take Money Out of the S Corp
• Processing S Corp Payroll
• Taking Shareholder Distributions
• Reclassify Shareholder Distributions
• Accountable Plan Expense Reimbursements
• Accountable Plan Requirements
• Shareholder Distributions as Reimbursements
• S Corp Tax Return Preparation
• Distributions in Excess of Basis
• Minimize Tax or Maximize Value (Economic Benefit)
• Tracking Fringe Benefits
• Other Tricks of the Trade with S Corps
• Adding Your Spouse to Payroll
• Chap 10 - Comingling of Money

Chap 11 - Tax Deductions, Fringe Benefits

• Chapter 11 Introduction
• Four Basics to Warm Up To
• Section 199A Deductions – Pass Through Tax Breaks
• 185 Business Deductions You Cannot Take
• Depreciation
• Small Business Tax Deductions Themes
• Value of a Business Tax Deduction
• Deductions the IRS Cannot Stand
• Automobiles and LLCs, S Corps
• Business Owned Automobile
• Section 179 and Bonus Depreciation
• You Own the Automobile, Get Reimbursed By The Mile
• You Own the Automobile, Take Mileage Deduction
• You Own the Automobile, Lease Back to Your Company
• Automobile Decision Tree
• Home Office Deduction
• Tax-Free Rental of Your Home
• Business Travel Deduction
• Deducting Business Meals
• Sutter Rule
• Capital Leases versus Operating Leases
• Putting Your Kids on the Payroll
• Educational Assistance with an S-Corp - Section 127
• Summary of Small Business Tax Deductions
• Business Tax Return Preparation
• Comingling of Money
• Reducing Taxes

Chap 12 - Retirement Planning

• Retirement Planning Within Your Small Business
• Self Employed Retirement Plan Basics
• Retirement Questions to Ask
• Tax Savings and Tax Deferrals
• Using a 401k in Your Small Business Retirement Options
• The Owners-Only 401k Plan
• Having Staff with a Solo 401k Plan
• Self-Directed 401k Plans
• Company-Sponsored 401k Plan
• 401k Plan Safe Harbor Provision
• Roth 401k Plans
• Roth 401k Versus Traditional 401k Considerations
• Two 401k Plans
• Rolling Old 401k Plans or IRAs into Your Small Business 401k Plan
• 401k Loans and Life Insurance
• 401k Plans and Roth IRA Conversions
• Turbo Charged 401k Plans
• SIMPLE 401k
• SEP IRA, Roth IRAs and the Roth Conversion
• Controlled Groups
• Owner Only 401k Plans in MMLLC Environment
• Spousal Attribution and Controlled Groups
• Non-Qualified Deferred Compensation Plan
• Exotic Stuff
• Expatriates or Expat Tax Deferral Planning
• Small Business Retirement Planning Recap
• WCG Fee Structure
• More About WCG
• Consultative Approach
• Core Competencies
• Expectations of Our Clients
• Final Words

Chap xx - Health Care

• Disclosure and Updates
• Gaming the HSA System
• Health Care Summary
• Health Savings Accounts (HSAs)
• Long-Term Care
• Multiple Employees
• One Person Show or Husband-Wife Team, S Corporation
• Section 105 Health Reimbursement Arrangement (HRA)
• Section 125 Cafeteria Plans and Flex Spending (FSA)
• Sole Proprietors and Single Member LLCs

Chap yy - Business Valuations, Sale, Exit Planning

• Business Valuation Techniques
• Buy-Sell Agreements
• Deal Structure
• Debt Service
• Exit Plans, Succession
• Purchase Price Allocation

Chap zz - Other S Corp Thoughts

• 1099 Income as Other Income, No Self-Employment (SE) Taxes
• Audit Rates and Risks with an S-Corp
• Recap of S-Corps
• Rental Losses with an S-Corp
• Rentals Owned by an LLC Fallacy
• W-2 or 1099-MISC That Is The Question

Expat and Expatriate KB

• Are there any downsides to claiming the foreign earned income exclusion?
• Are there exceptions to the bona fide residence or physical presence tests?
• As an ExPat, do I need to file a State tax return?
• Can I deduct mortgage interest paid on my foreign home?
• Do I have to pass the same test each year?
• Does voting through an absentee ballot mess up my bona fide foreign residency?
• How do fluctuating currency values affect my taxes?
• How do I handle my foreign rental property?
• How do I qualify for the foreign earned income exclusion?
• How do moving expenses affect my exclusion?
• How do partial years work with the foreign earned income exclusion?
• How do tax treaties affect my ExPat situation?
• How does the foreign housing exclusion or deduction work?
• If I am a self-employed ExPat, what taxes am I responsible for?
• If I don't qualify for the housing deduction, can I still deduct expenses?
• May I still make contributions to my IRA as an ExPat?
• What amount can I deduct for foreign earned income exclusion?
• What happens if my host country has a form of social security?
• What is a tax home or abode, and how do they relate to each other?
• What is considered foreign earned income?
• What is foreign earned income exclusion?
• What is the bona fide residence test?
• What is the difference between foreign tax credit and deduction?
• What is the physical presence test?

Rental Property KB

Rentals faqs.

• Can I claim my residence as a rental, sell it for a loss and deduct the loss?
• Can I deduct internet expenses?
• Can I deduct my cell phone charges?
• Can I deduct the taxes associated with public improvements?
• Can I rent out half a duplex or a room in my house?
• Do I need receipts for my rental expenses?
• Do rental properties offer good tax sheltering?
• How are repairs and improvements different?
• How do passive loss limitations affect me?
• I purchased a rental property last year. What closing costs can I deduct?
• If I don't have any rental income can I still claim a loss?
• If I move back into my rental, how does that work?
• If my employer provides a cell phone, is that income?
• Is depreciating my rental a good thing?
• My rental sale was a huge loss. What can I do?
• What are tax issues with an LLC owning a rental property?
• What are the exceptions to rental activities?
• What are the rules on a home office deduction?
• What is active participation versus material participation?
• What is considered rental income?
• What rental property expenses can I deduct?

Real Estate Pros

• Are rental activities always passive activities?
• Are there downsides to the real estate professional designation?
• Are there specific material participation tests for real estate professionals?
• Do I need to group my rental activities together?
• How do I record the hours spent as a real estate professional?
• If I meet the 750-hour test, do I also meet the 500-hour material participation test?
• What activities count and don't count?
• What are some of the IRS tricks to deny my real estate professional designation?
• What are some of the tax court cases for real estate professionals?
• What are the general tests for material participation?
• What is the definition of real estate professional?
• Why designate myself as a real estate professional?

Other Tax Information KB

• Can I ignore an IRS notice or claim I never received it?
• How can I pay my taxes or my notice of deficiency?
• How can I prepare for my face to face or interview field audit?
• How do I appeal the collections of unpaid taxes?
• How does a joint return get handled during an audit?
• How does bankruptcy affect my unpaid taxes?
• How much is interest and penalty on taxes owed?
• How should I respond to an IRS notice or letter?
• What are my chances of being audited?
• What are some of the types of IRS notices and letters?
• What can the IRS do if I don't pay my taxes- what is the collections process?
• What causes or triggers an IRS audit?
• What if I cannot pay my taxes?
• What IRS publications deal with audits?
• What is the appeals process?
• What is the period of limitations for an audit?
• What types of audits could I face?
• Who can be with me at my IRS audit or conference?

Charitable Contributions

• Are there ways to earmark money for an individual?
• Do I need receipts for my donations?
• Does deducting charitable contributions cause an audit?
• How do I determine the value of my donation?
• What are some of the donations I can deduct?
• What are some other charitable deductions?
• What are the limits of my donations?
• Who qualifies as a charity?
• Why give to charities?

Education, Tuition Deductions

• Are Educational Savings Accounts Worth It
• Are There Tax Breaks for Going to College
• Are There Tax Savings When My Employer Pays for My Education
• Can I deduct the cost of sports, games or hobbies while in college?
• IRAs and Savings Bonds To Help With Higher Education Costs
• What College Expenses Can I Deduct From My Income
• What constitutes a full-time student for tax purposes?

Homes and Real Estate FAQs

• Can I deduct the loss on my primary residence?
• Can I exclude the gain on my home sale?
• How does a Federal Disaster affect my casualty loss?
• My home was destroyed- what deduction can I take? How do casualty losses work?
• The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
• What is Cancellation of Debt? Is it taxable income?

Medical, Health Insurance

• What are qualified medical expenses?
• Why can't I deduct health insurance premiums?

Mortgages, Bad Debts

• Can I deduct a bad debt on my tax return?
• Is cancellation of debt always taxable?

Recordkeeping

• Are there specific records I need to keep?
• Do I need receipts for my expenses?
• How does proper recordkeeping affect my audit results?
• How long do I have to keep records?
• How should I maintain my tax records?
• What are the requirements for mileage records?
• Why should I keep tax records?

General Tax Questions

• Tax Brackets Misconceptions- Should I earn more money?
• What is the marriage penalty and how does it affect our tax returns?

Small Business KB

Small biz faqs.

• Articles coming soon

Turn Your Vacation Into a Tax Write Off

By Jason Watson ( Google+ )

Can you deduct your vacation expenses? Yes, but there is one small catch; there must be a business connection. Specifically, the reason for the trip must be for business, but mixing business with pleasure is perfectly legal. It’s not unheard of for business travelers to incorporate some personal time into their business trips, so why not build an entire vacation around it?

Skeptical? Even the IRS rules state if your trip was primarily for business but you extended your stay for a vacation, made a pit stop, or had other non-business activities, your business related travel expenses are deductible. Cool! The IRS just gave you a hall pass.

Certainly, there are a few more conditions to maximize the business turned vacation deductions. For one, you must be self-employed or small business owner. This won’t work if your employer pays your travel when they send you on business trips. And, there are of course IRS rules that must be followed for this to work. The IRS can be demanding when it comes to rules. Here’s how to make it happen.

1. Establish a business purpose ahead of time. Your trip must have a prior set business purpose. A prior set business purpose means meetings and appointments are arranged before the business travel even begins. A business trip arranged for, or including, business seminars and conferences does count, but only if they are directly related to your trade or profession.

2. Travel far enough away for an overnight stay. The travel must be away from your regular place of business and must require substantial rest or have an overnight stay. The business days should exceed the personal days and travel days are considered “business days.” If you take into consideration that Monday thru Friday are counted as business days and weekends are not, building a weekend into your business trip is a good strategy to maximize the vacation deduction. If you do business on Friday and on the following Monday, travel related expenses in between are deductible.

3. Know what expenses you can deduct. When your primary reason for travel is for business, all of your transportation costs, whether by plane, train, or automobile, are fully deductible. If you drive to your destination, you can take the standard mileage rate of 56.5 cents per mile (2013 rate) plus any parking and toll expenses. All the lodging, tips, and car rentals for business travel are also fully deductible, with food and meals limited to 50%. The cost of laundry and dry cleaning typically count as well.

4. Make it a family vacation. Of course the family can come along, but you can only deduct the expenses you would ordinarily pay for yourself. If you travel by air, your family’s tickets are not deductible. But if you drive, your transportation is fully deductible no matter how many people tag along in your Fordosaurus. Lodging is still deductible, but any upgrades to fit the family are not. You can only deduct the business expenses you would pay as if you were traveling alone.

5. Keep it reasonable. The IRS likes to use words like “reasonable” and “ordinary” when referring to deductible expenses. Don’t travel like a rock star unless you actually are a rock star. All business related expenses should be “reasonable based on the facts and circumstances.”

6. Keep really good records! Use your log book to write down expenses or use widely available expense tracking apps on your smartphone. Even though strict substantiation for travel expenses, other than lodging, isn’t required for expenses under $75, including these in your record keeping lends a bit more credibility to your deduction. Other items such as schedules and itineraries are good to keep to support your deduction, especially to prove the trade related nature of conferences and seminars.

So, you could fly to Orlando on Wednesday and get there early enough to sunbathe on the beach. Tricked you- no beaches in Orlando. Rewind. You fly to South Beach on a Wednesday and hang out with King James. Thursday you have an early morning meeting with a client, then follow-up with a lunch meeting on Friday. Saturday and Sunday are spent snorkeling and sightseeing. Monday, you attend a trade related seminar and Tuesday night you fly home. Your deductible business expenses for the trip would be:

$800 for round trip ticket

$869 for 6 night hotel stay (Sat & Sun count only if between business days)

$275 for car rental

$140 for seminar

$150 for 50% of business meals

$2,234 Total

Yes, for everything else there’s Mastercard. That’s not a bad chunk of change! All you probably did differently was take an earlier flight there, take a later flight home, and planned your business meetings early. Adding a weekend in between is a bonus. Either way, the business travel expenses remain the same.

One last thing, these strategies are intended for travel within the United States. If you’re planning on watching the parade at the 2016 Summer Olympics in Rio De Janeiro and calling it business travel, don’t do it. If your main consideration for traveling outside of the U.S. was vacation oriented, no deduction can be taken. The IRS will expect a good reason for why your business couldn’t have been conducted within the United States. Even then, 75% of the trip must be for business as a good jumping off point. Anything less than that, starts looking like a vacation in disguise.

Information provided on this web site “Site” by WCG Inc. is intended for reference only. The information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. This Site may contain references to certain laws and regulations which may change over time and should be interpreted only in light of particular circumstances. As such, information on this Site does NOT constitute professional accounting, tax or legal advice and should not be interpreted as such.

Although WCG Inc. has made every reasonable effort to ensure that the information provided is accurate, WCG Inc., and its partners, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. The user accepts the information as is and assumes all responsibility for the use of such information. WCG Inc. also does not warrant that this Site, various services provided through this Site, and any information, software or other material downloaded from this Site, will be uninterrupted, error-free, omission-free or free of viruses or other harmful components.

• ZenBusiness > …
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How Are Single-Member LLCs Taxed?

Learn more about single-member LLC taxes, how these entities are taxed, and the requirements for filing.

Manage everything in one place: maximize tax deductions, send invoices, and get paid fast. Learn how ZenBusiness Money can help you today.

Updated: 2/23/24

How to File Taxes for a Single-Member LLC

For single-member LLCs adhering to the default disregarded entity status, tax reporting integrates directly into the owner’s personal tax returns. Profits and losses are documented on Form 1040 or 1040-SR, Schedule C, “Profit or Loss from Business (Sole Proprietorship).” This method treats LLC income as personal income, directly affecting the owner’s tax liabilities and benefits.

Opting for Corporate Taxation

Electing s corporation status.

Single-member LLCs may choose to be taxed as an S corporation to potentially reduce self-employment tax obligations. Only the salary paid to the owner is subject to self-employment taxes, not the entire business profit. To elect S corporation status, a single-member LLC must file Form 2553 with the IRS. This election allows for pass-through taxation, where the business itself isn’t taxed, but its income is reported on the owner’s personal tax returns using Form 1120-S.

Electing C Corporation Status

An LLC can also elect to be treated as a C corporation by filing Form 8832. This status creates a separate taxable entity, where the corporation itself is taxed on profits, and dividends distributed to the owner are taxed again on their personal returns, leading to double taxation. However, C corporation status allows for a broader range of tax deductions and benefits under certain conditions. Annual federal business tax returns must be filed using Form 1120.

Tax Deductions

If you operate as a single-member LLC, you can claim the standard deduction or file itemized deductions. For many business owners, filing itemized deductions can yield substantial savings. 

Here are just a few of the common items you may be able to write off as a business expense. Let’s go through them to see what tax savings you can get from these single-member llc deductions. For more, see our page on tax write-offs for your LLC .

Home Office Deduction

Single-member LLC owners who use a portion of their home exclusively for business can claim the home office deduction. This includes a prorated portion of rent or mortgage interest, property taxes, utilities, homeowners’ insurance, and repairs. The IRS offers two methods for calculating this deduction: the simplified option (a standard deduction per square foot of office space) and the regular method (based on actual expenses). Learn more about home office tax deductions .

Vehicle Expenses

If you use your vehicle for business, you can deduct expenses related to its business use. This includes gas, repairs, insurance, and depreciation. Two methods are available for this deduction: the standard mileage rate (a set rate per business mile driven) and the actual expense method (total vehicle expenses multiplied by the percentage of business use).

Office Supplies and Equipment

Purchases made for your business, such as office supplies, furniture, and computer equipment, are tax deductible. Immediate deductions or depreciation over several years are options, depending on the item’s cost and useful life.

Professional and Legal Fees

Fees paid for legal advice, accounting services, and other professional services directly related to your business operations are fully deductible. This ensures that costs associated with maintaining legal and financial compliance don’t unduly burden your business.

Advertising and Marketing

Costs incurred in promoting your business, including advertising, website maintenance, and marketing materials, are deductible. This broad category supports efforts to grow your customer base and enhance brand visibility.

Education and Training

Expenses for education and training that maintain or improve skills required in your business are deductible. This includes courses, webinars, and workshops relevant to your industry.

Health Insurance Premiums

Single-member LLC owners can deduct health insurance premiums for themselves, their spouse, and dependents, even if the insurance plan is in the name of the business. This significant deduction can reduce your taxable income considerably.

Retirement Contributions

Contributions to retirement plans, such as a SEP IRA or a Solo 401(k), are deductible. This not only lowers your current tax liability but also encourages financial planning for the future.

Travel Expenses

Business-related travel expenses, including airfare, lodging, and a portion of meals, are deductible. To qualify, the travel must be primarily for business and away from your tax home.

Business Insurance

Premiums paid for business insurance, such as liability insurance, property insurance, and malpractice coverage, are deductible. This ensures that necessary protections for your business operations don’t adversely affect your profitability.

By taking advantage of these and other applicable tax deductions, single-member LLCs can significantly reduce their taxable income, thus lowering their overall tax burden. Proper documentation and adherence to IRS guidelines are crucial for claiming these deductions. It’s recommended to consult with a tax professional to ensure you’re maximizing your deductions while remaining compliant with tax laws.

What are the tax benefits of a single-member LLC?

If you’re launching a new business or have already started one and are looking to organize it properly, you may be looking into things like incorporating or forming an LLC. What’s best for you will ultimately depend on your business, who owns it, the amount of personal liability you’re willing to risk, how it operates, and what tax situation makes the most sense. A single-member LLC can offer several advantages and benefits.

The primary tax benefit of a single-member LLC is that they’re typically treated as disregarded entities by the IRS , meaning there’s no separation between the LLC and the owner for tax purposes. They’re taxed similarly to a sole proprietorship by the IRS, meaning that owners will simply report income and expenses related to the LLC on their federal tax returns rather than needing to file a separate one for the LLC or pay additional taxes for the LLC. 

In some cases, an LLC can elect to be taxed as a C corporation or an S corporation. Filing as an S corporation can be helpful for reducing your self-employment tax burden because only your salary is subject to self-employment taxes (the taxes earmarked for Social Security and Medicare), but not the remaining profits. You avoid double taxation as an S corporation because businesses taxed as an S corp have pass-through taxation like a sole proprietorship or partnership. However, you’ll still have to submit a separate tax form, Form 1120-S.

Having your LLC taxed as a C corporation means facing double taxation because the LLC is taxed on its profits, and then the dividends are taxed again on individual returns of the members. However, certain more profitable LLCs sometimes elect C corporation taxation for a variety of reasons, such as the wider range of tax deductions.

Additional Considerations and Resources

Irs assistance.

The IRS provides extensive resources to help single-member LLCs navigate their tax obligations, including:

• Publication 538: Details on accounting periods and methods.
• Instructions for Form 1065: Guidance for LLCs treated as partnerships.
• Small Business and Self-Employed Tax Center: A hub of tax information for small businesses.

Professional Help

Given the complexities of tax law, consulting with a tax professional is highly recommended. Services like ZenBusiness can assist in organizing your finances, making tax time more manageable.

We can help!

If you’re worried about single-member LLC taxes, fear not; you don’t have to go it alone. Not only can we help you form an LLC , but services like our ZenBusiness Money tool can help you get organized for filing your small business taxes so you can take benefit from tax advantages.

Reach out today by either visiting us online or calling 1-844-493-6249 to learn how ZenBusiness services can help you launch, run, and grow your business. 

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional .

Single Member LLC Tax FAQs

How do single-member LLCs save on taxes?

Single-member LLCs can save on taxes by taking advantage of business-related deductions on the owners’ tax returns. Furthermore, depending on the scope of the single-member LLC, it may save on taxes by being treated as a disregarded entity not subject to corporate tax rates. However, in other situations, the single-member LLC may elect to be taxed as a corporation, which can provide benefits in certain situations.

What are the disadvantages of a single-member LLC?

While there are several advantages to having a single-member LLC, having an LLC means more paperwork than having a sole proprietorship, though less than a corporation. An LLC will also have startup filing fees and, in most states, ongoing fees for an annual or biennial report .

Does the IRS recognize single-member LLCs?

In most instances, the IRS treats a single-member LLC as a “disregarded entity,” meaning it’s not considered separate from its owner regarding taxation status. However, an LLC that elects to be taxed as a C corporation will be treated as a separate taxable entity.

Tax Information and Resources

• 6 Tax Hacks For SMB Owners
• 3 Common Tax Problems You Can Fix
• 7 Tax Planning Myths
• Avoid Tax Time Frustrations
• 6 Tax Hacks For SMB
• Tax Tips For The Self Employed
• Guide to EIN Numbers
• Tax Deductions For Purchasing Artwork
• Small Business Tax Basics
• Compare the Benefits of Inc vs LLC Taxes
• Helpful Tax Tips
• Owing the IRS 6 Tips
• Home Business Tax Deductions
• End of Year Tax Strategies
• Can I Deduct My Hobby?
• Avoid Capital Gains Tax on Stock Sales
• Calculate Sales Tax
• Track Tax Deductible Expenses
• Sales Tax Nexus Explained
• What Does an SMB Pay in Taxes
• Payroll Tax Guide
• LLC Tax Filing Deadline
• Taxes As An Artist
• Top 19 Tax Deductions
• National Internet Sales Tax Bill
• Abusive Tax Shelter Info
• Self Employed Tax Mistakes
• Tax Write-Offs for an LLC
• What is a W9
• TINs and 1099s
• Small Business Federal Taxes
• How to File Taxes for LLC
• Tax Information for LLC's
• Fed and State Tax ID Numbers
• California Franchise Tax Board Fee
• Independent Contractors
• Business Tax Refund
• 50 Tax Deductions Not to Miss
• K1 Tax Forms
• Tax Credits As Revenue for Your Business
• State Business Taxes
• How To Sell Your Business
• Self Employed Tax Deductions
• Income Tax Liability: What You Need to Know
• Home Business Tax Breaks
• Home Office Deductions
• W2 Prep & Reading
• Quarterly and Annual Tax Filing
• Filing Partnership taxes
• Avoid Triggering an IRS Audit
• Difference 401k & 401a
• Deduct Start Up Expenses
• What is Franchise Tax
• File for a Tax Extension
• Self Employed Quarterly Tax Filing
• SMB Tax Deductions
• Don't Forget These Deductions
• Choosing LLC Fiscal Year
• Vehicle Tax Deduction
• How are LLCs Taxed?
• Tax ID Numbers

Popular States to Form a Single Member LLC

• Form Your SMLLC in California
• Form Your SMLLC in Florida
• Form Your SMLLC in Massachusetts
• Form Your SMLLC in Pennsylvania
• Form Your SMLLC in Colorado
• Form Your SMLLC in Texas
• Form Your SMLLC in Georgia
• How To Start a Single Member LLC
• Do Single Member LLC's Need an EIN
• How Do I Pay Myself From a SMLLC
• SMLLC Operating Agreement
• Form Your SMLLC in New York
• Single Member LLC Capitol Contribution
• Single Member LLC Definition

Start an LLC in Your State

When it comes to compliance, costs, and other factors, these are popular states for forming an LLC.

• Colorado LLC
• Michigan LLC
• New York LLC
• California LLC
• Florida LLC
• Kentucky LLC
• North Carolina LLC
• Arkansas LLC
• Georgia LLC
• Pennsylvania LLC
• Wisconsin LLC
• Virginia LLC
• Illinois LLC
• Connecticut LLC
• North Dakota LLC
• New Mexico LLC
• Tennessee LLC
• Maryland LLC
• Montana LLC
• Oklahoma LLC
• Mississippi LLC
• Washington LLC
• Wyoming LLC
• Alabama LLC
• Indiana LLC
• District of Columbia DC LLC
• Missouri LLC
• Rhode Island LLC
• South Carolina LLC
• New Hampshire LLC
• South Dakota LLC
• Delaware LLC
• Minnesota LLC
• Vermont LLC
• New Jersey LLC
• Louisiana LLC
• West Virginia LLC
• Massachusetts LLC
• Nebraska LLC
• Arizona LLC

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Keeping CPAs Up to Date on Tax Matters

A site devoted to articles on current developments in federal taxes geared toward CPAs in tax practice.

IRS Memorandum Discusses Deduction of Aircraft Expenses by a Sole Proprietor

In Chief Counsel Advice 202117012 [1] the IRS looks at issues surrounding the deduction of expenses related to the use of aircraft by a sole proprietor.  Specifically, the ruling looks at whether the taxpayer uses:

The primary purpose test found at Reg. §1.62-2(b) or

The allocation methods found at Reg. §1.274-10(e)

Primary Purpose Test for Travel Expenses (Reg. §1.162-2(b))

The primary purpose test for travel expenses of a taxpayer is found at Reg. §1.162-2(b)(1) which provides:

(1) If a taxpayer travels to a destination and while at such destination engages in both business and personal activities, traveling expenses to and from such destination are deductible only if the trip is related primarily to the taxpayer’s trade or business. If the trip is primarily personal in nature, the traveling expenses to and from the destination are not deductible even though the taxpayer engages in business activities while at such destination. However, expenses while at the destination which are properly allocable to the taxpayer’s trade or business are deductible even though the traveling expenses to and from the destination are not deductible. [2]

Reg. §1.62-2(b)-2(b)(2) notes that the test is based on facts and circumstances, but that the amount of time spent on each type of activity is a key item to be considered:

(2) Whether a trip is related primarily to the taxpayer’s trade or business or is primarily personal in nature depends on the facts and circumstances in each case. The amount of time during the period of the trip which is spent on personal activity compared to the amount of time spent on activities directly relating to the taxpayer’s trade or business is an important factor in determining whether the trip is primarily personal. If, for example, a taxpayer spends one week while at a destination on activities which are directly related to his trade or business and subsequently spends an additional five weeks for vacation or other personal activities, the trip will be considered primarily personal in nature in the absence of a clear showing to the contrary.

So, for example, if someone who works as a CPE instructor (such as I do) flies to a city to give a CPE session, we look to see if the primary purpose of the trip is for business to determine if the travel costs will be deductible.  Normally the answer will be yes, as I would have traveled to the city at the request of a customer located in that city.  Normally I would be in the city only for the days when I am presenting a session, and only incidentally would I spend time on personal pursuits.

But if I was heading to a city for a major family event, spending two weeks with family, managing to arrange to give a one-day CPE session while in that location would not make the travel deductible except for expenses directly related to that one day continuing education session.  Such costs would be those costs I would not have incurred on the trip but for giving that CPE session.

As always, the burden would be on the taxpayer to show that business motivations were the primary reason for the trip or, if that could not be shown, what expenses incurred on the trip were related to business activities.

The memorandum discusses the Bruns case to show how courts have applied this test:

In Bruns v. Commissioner, T.C. Memo. 2009-168, 2009 WL 2030886, at *11–*12 (July 14, 2009), the taxpayer claimed deductions for travel expenses related to trips having a mixed business and pleasure motivation. The court noted that on these trips, taxpayer visited friends and relatives who were also customers and distributors in the taxpayer's business. Updating these customers and distributors about the new products and providing coaching on business leadership was business related. Visiting with friends and relatives about matters not related to the business was for pleasure. The court cited § 1.162-2(b)(1), (2) and (c), explaining that petitioners would be entitled to a deduction for expenses incurred at the location properly allocable to business activities. However, petitioners failed to provide sufficient information to allow any of the disallowed travel expenses. [3]

Special Rules for Aircraft Used as Entertainment (Reg. §1.274-10)

IRC §274(a) disallows any deduction for expenses related to an entertainment facility.  Aircraft is subject to special limitations described at Reg. §1.274-10.

Certain exceptions to the bar on deductions related to entertainment facilities are described by the memorandum:

Section 274(e)(2)(A) excepts expenses for goods, services, and facilities for entertainment from the § 274(a) disallowance to the extent that the expenses are treated by the taxpayer, with respect to the recipient of the entertainment, as compensation to the employee on the taxpayer's returns and as wages to such employee for purposes of chapter 24 (withholding of income tax at source on wages). Section 274(e)(9) similarly excepts expenses to the extent that the expenses are includible in the gross income of a recipient of the entertainment who is not an employee of the taxpayer as compensation for services rendered or as a prize or award.

Section 274(e)(2)(B) provides that in the case of a “specified individual,” the §274(e)(2)(A) and (9) exceptions to the § 274(a) disallowance apply only to the extent that the expenses do not exceed the amount of expenses that are treated as compensation to the specified individual. [4]

Thus, under this exception a deduction could be allowed for entertainment use of the airplane so long as the expenses were includable in the compensation of an employee as additional wages or as a payment for services to a non-employee. 

If that person is a “specified person” (roughly those in a position of control of the business) the deduction is limited to the amount included in the compensation of the individual.  This rule was enacted due to taxpayers noting that the rules on valuing such flights for the service provider often resulted in amounts of compensation being taxed to the provider that was far less than the allocable cost of providing the service to the individual.

The CCA goes on to explain the regulation relating to entertainment use of an aircraft as follows:

Section 1.274-10(a)(1) provides that no deduction otherwise allowed under Chapter 1 is allowed for expenses for the use of a taxpayer-provided aircraft for entertainment, except as provided in § 1.274-10(a)(2).

Sections 1.274-10(a)(2)(ii)(A) through (C) provide exceptions to the disallowance of expenses for entertainment air travel for expenses treated as compensation to employees who are not specified individuals, non-employees who are not specified individuals, and specified individuals, respectively.

Section 1.274-10(e) provides rules for allocating expenses between the various individuals present on a flight with a specified individual and the character of each passenger's use of the aircraft. [5]

In this situation, a business could claim a deduction for expenses related to operating the aircraft, even if for entertainment purposes (such as taking a purely personal trip that had no business connections), so long as the service provider picked up income.  If that service provider was a specified individual, then the deduction would be limited to the amount of income recognized by the service provider.

Application to Self-Employed Individuals

The CCA looks at the following situation.

Taxpayer is a sole proprietor and a Schedule C business owner who wholly owns and operates a business in either: (i) his or her own personal capacity, or (ii) through a single-member LLC which is disregarded as an entity separate from its owner for federal income tax purposes. The sole proprietor owns an aircraft either directly or indirectly through a single-member LLC and uses the aircraft to travel for business and entertainment purposes. Family members, friends, and business associates of the sole proprietor regularly travel with the sole proprietor on the aircraft. [6]

So now the question is simply this:  in deciding about deducting expenses related to this aircraft, does the proprietor simply apply the primary purpose test to the operation of the aircraft as a travel expense, or do we look to the allocations under the special rules in Reg. §1.274-10 for entertainment use of an aircraft?

The CCA determines that only the primary purpose test for travel expenses apply to the sole proprietor, though if others on the plane are using it for entertainment operating costs may still be partially disallowed due to the entertainment deduction limitations.

First, the IRS notes that the proprietor is not an employee, so the rules related to an employee cannot be applied:

The exceptions to the disallowance of entertainment expenses in § 274(a) for expenses treated as compensation in § 274(e)(2) and (9) do not apply to a sole proprietor. In relevant part, § 274(e)(2) applies to the use of entertainment facilities by an employee of the taxpayer. A sole proprietor is not an employee of the sole proprietorship under the usual common law rules and does not receive compensation and wages from the sole proprietorship; rather, the sole proprietor is a self-employed individual for federal income tax purposes, and directly earns income from operating the business as an individual.

The use by a sole proprietor of an aircraft owned by the sole proprietor (directly or in a disregarded entity), whether for business or personal/entertainment use, does not result in compensation or imputed income, and cannot be reported as wages or as income. Hence, the exception from § 274(a) under § 274(e)(2) cannot apply to a sole proprietor. [7]

The CCA also concludes that the second category related to a person who is not an employee cannot apply because the proprietor can’t end up recognizing income from the use of an aircraft the proprietor owns:

Similarly, for purposes of § 274(e)(9), while the sole proprietor is a person “who is not an employee,” the use of the sole proprietor’s own aircraft by the sole proprietor is not “includible in the gross income of the (sole proprietor) recipient” as compensation or as a prize or award by the sole proprietorship. Therefore, the exception to § 274(a) under §274(e)(9) cannot apply to the sole proprietor’s use of the aircraft.

Because § 274(e)(2) and (9) do not apply to a sole proprietor, the allocation rules of §1.274-10 promulgated thereunder have no application, and arguments concerning whether the taxpayer is or is not a specified individual are not relevant for these purposes. [8]

The last sentence of this part of the analysis may give a clue regarding why this CCA was issued.  Presumably, some might try and argue that a sole proprietor is not a specified individual, thus we could have a situation where the proprietor recognized income on the value of the trip that is far less than the costs incurred for operating the aircraft for the non-business trip.

The memorandum concludes that the issues related to use of the aircraft of the sole proprietor must be viewed through the travel rules found in Reg. §1.62-2, concentrating on the primary purpose of the trip:

Expenses for use by a sole proprietor of an aircraft owned by the sole proprietor may be deductible under § 162 based on the primary purpose test. If the primary purpose of a flight is personal rather than business, the expenses for the flight are not expenses paid or incurred in pursuit of the taxpayer’s trade or business under § 162(a) and are nondeductible pursuant to § 262(a). The determination as to whether a mixed-use flight is a deductible business flight or a non-deductible personal flight is a facts and circumstances determination made under § 162 and the related regulations and case law. [9]

However, this does not allow the proprietor to deduct all expenses if other individuals accompany the proprietor on the flight.  Rather, the CCA argues, the proprietor must make a reasonable allocation between business use and nondeductible entertainment use for potentially deductible items related to the aircraft.

Limitations for entertainment expenses may apply to deductions for the use by a sole proprietor of an aircraft owned by the sole proprietor. An allocation between business use and nondeductible entertainment use of an aircraft must be made using a reasonable method when deducting expenses, including depreciation, for a flight if any person on the flight engaged in entertainment activities during the associated trip. The primary purpose test is not applicable to this analysis and is not a reasonable method for this purpose.

This means that other persons can’t “tag along” with the proprietor on a business flight by simply testing to see if the proprietor meets the primary test for the trip to get a full deduction for all expenses—rather the entertainment use of the aircraft by those other individuals may jeopardize a portion of the deduction.

This allocation is required because § 274(a): (i) limits deductions for business entertainment use of an aircraft for amounts paid or incurred prior to January 1, 2018, (ii) disallows deductions for non-business entertainment use of an aircraft for amounts paid or incurred prior to January 1, 2018, and (ii) disallows deductions for any entertainment use of an aircraft for amounts paid or incurred after December 31, 2017. Deductions for the portion of the flight allocable to persons accompanying the sole proprietor may be further reduced under § 274(m)(3) and § 1.162-2(c). [10]

[1] CCA 202117012, April 30, 2021, https://www.taxnotes.com/research/federal/irs-private-rulings/legal-memorandums/irs-allows-primary-purpose-test-for-deducting-aircraft-expenses/59pgm (retrieved May 9, 2021)

[2] Reg. §1.162-2(b)

[3] CCA 202117012, April 30, 2021

[4] CCA 202117012, April 30, 2021

[5] CCA 202117012, April 30, 2021

[6] CCA 202117012, April 30, 2021

[7] CCA 202117012, April 30, 2021

[8] CCA 202117012, April 30, 2021

[9] CCA 202117012, April 30, 2021

[10] CCA 202117012, April 30, 2021

It’s not too late for 2023 taxes! More info here .

How to Reimburse Yourself From Your Business

Ever wonder how to reimburse yourself from your business? Depending on your business entity type, you may or may not have to worry about it.

Reimbursement with Sole Proprietorships

With sole proprietorships, there’s no need for any type of formal reimbursement. You become a sole proprietorship by default in the moment you begin selling online. From an IRS standpoint, there is no registration required. It’s as simple as that.

Most resellers don’t have separate phones, cars, or offices for their businesses. That being the case, the line between business and personal usage can get fuzzy. Luckily, the IRS allows us to deduct the business portion of usage in those areas.

For example, let’s say 4,000 of the 8,000 miles I drive during the year are directly related to my business. I can deduct those 4,000 miles (58 cents per mile for 2019) on Schedule C of my personal income tax return.

Say I personally paid $1,500 for my cell phone during the year. If 60% of the usage was business related, I can deduct $900.

Let’s say I had a qualifying home office space that was 300 square feet of my 1,200 square foot apartment. I can deduct $1,500 utilizing the simplified home office deduction method ($5 square foot up to 300 square feet). Or I can deduct 25% (300 sq ft / 1,200 sq ft) of my shared home expenses utilizing the regular method. (Shared expenses include costs such as rent, mortgage interest, home insurance, utilities, & depreciation.)

All of those deductions are fairly simple to take advantage of on your Schedule C as a sole proprietor.

The same treatment will be applied if you form a single-member LLC. The IRS will consider to you be a “disregarded entity,” which means you will be taxed the same as if you were a sole proprietor.

But, when you form a multi-member LLC or an S corp, you now have a legally separate entity and are no longer eligible to directly deduct the expenses shared between business and personal use.

Many new multi-member LLC members are so accustomed to deducting these expenses directly on their tax returns. So it’s not uncommon for them to continue to do so even when they are no longer sold proprietors. But the IRS is not a fan of this treatment.

Luckily, there is a way to still get the equivalent benefit of those deductions.

Multi-member LLCs and Partnerships

If you are an owner of an LLC, you are an LLC member. If you are an owner of a partnership, you are a partner. LLCs have operating agreements, and partnerships have partnership agreements. In order to deduct personally incurred business expenses, these businesses need to choose one of the the below methods for deducting business expenses paid for personally.

Reimburse partners/members for business-related expenses.

Require owners to pay expenses personally – unreimbursed partnership expenses (UPE)

It’s usually one or the other, and it needs to be specified which you are using in your operating/partnership agreement.

The first way is basically the same as an accountable plan, which well talk about in a minute, but since accountable plans only apply to employees, and as a member or partner you’re technically not an employee, we don’t call it that. I just call it a reimbursement arrangement. If you use personal funds to buy business supplies, or for the business to take the mileage or home office deduction, it will have to reimburse you and deduct those reimbursements, which are nontaxable to you as the individual.

The second way is not to worry about reimbursements but rather to deduct what’s called unreimbursed partnership expenses on the personal tax return. So if the LLC/partnership requires owners to pay expenses personally (i.e., there is no right to reimbursement), then these owners can deduct their unreimbursed partnership expenses on their personal returns.

So that is for MMLLCS & Partnerships.

S Corporations and Accountable Plans

As an S corp you are both the owner as well as an employee. Remember with an S corp you have to pay yourself a reasonable W-2 salary. As an employee you can take advantage of what’s called an accountable plan. This is basically the same thing as the reimbursement arrangement we just talked about.

An accountable plan is just a fancy way of saying that you have a system in place to reimburse employee or owner expenses. The benefit is that the expenses will be deductible to the business and nontaxable to the individual.

Ideally, you will have this arrangement formalized in a simple document (like this one ) that specifies the process of receiving reimbursement.

For expenses to qualify as deductible to the business as part of an accountable plan, the plan must incorporate the 3 following rules:

• The expenses must be business related
• You need to submit for reimbursement within a reasonable period of time (within 60 days) after incurring the expenses
• You need to return any excess reimbursement within a reasonable period of time (within 120 days)

Simple enough right?

Getting started

So here’s what you actually do after you form your entity.

• Draft up a simple document (whether it’s one of the reimbursement arrangements for LLCs/Partnerships or an accountable plan for an S corp) that states how expenses will or will not be reimbursed.
• Establish a frequency (monthly, quarterly, etc.) of updating a record to reflect the expenses for the period that you have incurred personally on behalf of the business.
• Transfer that amount from your business bank account to your personal bank account.
• Split out and classify the amount transferred to the appropriate expense categories within whatever bookkeeping system you use.

Now you have additional deductions on your books and more (nontaxable) cash in your pocket.

Reclassifying distributions

One thing many people do that the IRS frown upon is taking the above-mentioned deductions without having actually reimbursed themselves through an accountable plan.

When you do this, you are getting the benefit of a tax deduction without incurring the usual outlay of cash. Keeping the cash and taking the deduction simultaneously is bad.

One method some CPAs use to get around that situation is to “reclassify” distributions as reimbursements.

This simply means that you just consider a portion of the distributions you took during the year as reimbursements. If you are reclassifying distributions that were taken more than 60 days prior, however, it won’t meet the “reasonable time” requirement and technically wouldn’t qualify (although that doesn’t stop many people from doing it anyway). But even though the IRS likely won’t catch it, it’s best just to do it correctly from the beginning.

Periodic reimbursements

In summary, if you have a separate business structure such as a multi-member LLC, it should be making periodic reimbursements to you that are substantiated in writing. Those reimbursements should be governed by a reimbursement arrangement or accountable plan.

If you do it that way, you won’t miss out on being able to properly deduct business expenses that you personally incur.

26 Comments

Thanks for clarifying the rules on reimbursements, even for single-member LLC’s I’m particularly glad to see the mention of mileage deductions. I used to have a brick and mortar business selling GPS trackers to small business fleets.

I used to track my business miles with the old-fashioned Dome milage log. A real pain. When I put a tracker on my own car … wow … I was easily losing over 1200 business-related miles a year that I had neglected to log. That would be almost $700 at today’s rates. Even small-time resellers and bloggers really need to track their miles diligently. Those trips to UPS or the post office can really add up.

Absolutely! Small businesses lose so much money each year for either not tracking or failing to deduct their business miles.

I am a Sole Proprietor entity, but I have joined a direct sales company and converted my bedroom into an office and I do alot of events, traveling, etc. And i have purchase things for my business but i been working under the Sole Proprietor entity.

Can i still deduct my expenses?

You definitely can as long as you use the room regularly and exclusive for your business. Most expenses that you incur in the course of business will be deductible 🙂

Is there a legal time limit for reimbursing for expenses / purchases from an LLC or S corp, or even a Sole Prop before the expense would not be eligible or must have some sort of devaluation included in the reimbursement?

I am a sole proprietor of a new business and use my vehicle for business mileage. Can I put the business miles on an expense report with the proper documentation and pay myself for them and charge it to the company? Or must I just use the amount as a deduction on schedule C?

You would only actually reimburse yourself from the business if you have a partnership or S corp. With a single member LLC or sole proprietorship, you just take the deduction on the Sch C.

Can you reimburse yourself and not take the deduction on the schedule c? Seems like one or the other. When first starting a business, the monthly reimbursement helps with car/gas expenses as the business grows

Do you think that home office depreciation can be considered a reimbursable expense? I read mixed opinions on this one. Thank you!

Yes, that should be okay. Just be aware that the depreciation should be “recaptured,” (taxed) if you ever sell the home.

Members of LLCs taxed as a Partnership cannot have an accountable plan with the LLC because partners are not considered employees of the LLC and the accountable plan is between employee and employer. If, however, the LLC is taxed as an Corporation, then the accountable plan will work. However, not all is lost. The Members treated as Partners have Unreimbursed Partners Expenses which can be directly deducted against K-1 income , marked on form as UPE. The operating agreement must state that the certain expenses are not going to be reimbursed and must be paid by the members. Here, the partners’ unreimbursed expenses are not subject to the limitation for employees, simply because they not employees.

Hi, really great article and exactly what I was looking for. Could I please confirm with you that this applies to my situation? I formed an LLC (Single member) with an S Corp Designation. Prior to formation, I personally paid for organizational costs to form the company. My plan is to write a check from the business to me personally for reimbursement, and then deduct as expenses on my business taxes (up to $5k for organizational).

Hi Tim – Yes that’s how I would do it. Another option would be to treat that as an equity investment, but I like the idea of deducting it better.

Can you tell me more about what treating that as an equity investment would look like? My situation is that I’m in my second year running a single member LLC business in CA (haven’t designated as an S corp yet) and I’ve been logging my expenses regularly but last year (2022) Turbo Tax told me it made more sense to take the standard deduction than itemize so I did that. In that case, do I still need to reimburse myself for my business expenses? If I file as an S corp this year (2023), I assume I need to reimburse myself for my business expenses or treat them as an equity investment. Do I have the right idea?

As a single member LLC, the IRS treats you the same as a sole proprietor so no reimbursement necessary for the tax piece. Although from a legal perspective, it’s might be safer to reimburse or just make sure all expenses go through the business account, so you don’t lose the liability protection. You are correct on the S corp. The itemized vs standard deduction is a totally separate issue, that is all on the personal side of the tax return regardless of any business activity.

Helping two people who started a LLC; prior to opening a separate bank account for their business, they each paid for business expenses from their own personal bank account. How do I account for these expenses on their financial statements? If I “debit” expenses, what do I “credit”? Equity account for each person? Business has not reimbursed each owner for these expenses.

so if a 3 member llc of partners are not reimbursed by llc for mileage

where do they claim the mileage on their taxes? on schedule c? or would they have a separate line on k-1?

Yes on the K-1: https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/unreimbursed-partnership-expenses/

how to reflect the business income going to you personally

I own an LLC Partnership. We are a heating and cooling business. I also happen to be a paralegal. If I do legal research for an issue related to the business, can I reimburse myself for professional services?

I think that would more likely classify as a contractor deduction for the business and taxable income to you as a paralegal. It would be a nontaxable reimbursement if you were operating for the heating/cooling business and used personal funds for business expenses.

My husband has been developing a product which he intends to sell after completing the software development and building the physical unit for the product. Can he deduct time he has spent doing all this work prior to selling the product, on his Form 1040 schedule C. He is a sole proprietor.

Unfortunately you cannot claim a deduction for time spent. Typically there has to be a dolloar amount incurred.

As a single member LLC can I pay myself mileage reimbursement while driving company’s business car? Thanks.

If we buy our partner out of an S corp. We give him $20,000 from our personal account. Can I deduct that on my personal taxes?

It wouldn’t typically be deductible but would rather increase your equity stake in the company.

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Can My Llc Pay Me Per Diem For Travel Expenses?

• Last updated May 14, 2024
• Difficulty Advanced

• Category Travel

If you travel frequently for business as a member of a limited liability company (LLC), you may be wondering if your LLC can provide you with per diem payments to cover your travel expenses. While it's a common practice for employers to offer per diem to their employees, the rules can be a bit more complex when it comes to LLCs. In this article, we will explore the possibilities and limitations of paying per diem as a member of an LLC, and provide you with the information you need to make an informed decision.

What You'll Learn

Introduction to per diem payments for llc business travel, exploring the legality of per diem payments for llcs.

• How to Calculate Per Diem Payments for LLC Employees?

Important Considerations for LLCs Making Per Diem Payments

As a small business owner, it's important to understand the different ways you can compensate yourself for business-related expenses, including travel. One method that can be particularly beneficial for LLC business owners is the use of per diem payments.

Per diem refers to a specific daily allowance that an employer provides to employees for lodging, meals, and incidental expenses incurred during business travel. This method allows for easy reimbursement and helps to simplify expense tracking for both the employee and the employer.

If you run an LLC and are wondering whether you can pay yourself per diem for travel, the answer is yes. However, there are some important considerations and rules you should be aware of to ensure compliance with the Internal Revenue Service (IRS).

• Understand the IRS per diem rates: The IRS sets per diem rates for different locations within the United States as well as for various international locations. These rates take into account different factors such as the cost of living and vary depending on the location and time of year. It's important to consult the IRS website or speak with a tax professional to determine the appropriate per diem rate for your travel destination.
• Keep accurate records: To qualify for per diem payments, you must keep accurate records of your travel expenses. This includes documenting the dates of travel, locations visited, and the purpose of the trip. It's also important to keep receipts for any expenses that exceed the per diem rate, as these expenses may be deductible.
• Determine your reimbursement method: There are two methods of reimbursement for per diem expenses: the accountable plan and the nonaccountable plan. Under the accountable plan, you must provide detailed records and return any unused per diem amounts to the company. This method is generally preferred for tax purposes. The nonaccountable plan does not require detailed records or the return of unused per diem amounts, but it may have tax implications for both the employee and the employer.
• Consult with a tax professional: Paying yourself per diem for travel can have tax implications, so it's always wise to consult with a tax professional who can guide you through the process. They can help ensure you are following the IRS guidelines and maximizing any potential deductions.

In conclusion, as an LLC owner, you can pay yourself per diem for business travel expenses. However, it's important to understand the IRS rules and guidelines surrounding per diem payments to ensure compliance and maximize any potential deductions. By staying organized and consulting with a tax professional, you can simplify your travel reimbursement process and ensure you are making the most of your business-related travel expenses.

Understanding Employee Travel Expenses: Are Employers Required to Pay for Meals?

You may want to see also

As a business owner, you may be wondering if it is possible for your limited liability company (LLC) to pay you per diem for travel expenses. Per diem payments provide a convenient way for companies to reimburse employees for travel-related expenses without requiring them to submit individual receipts. However, it is important to understand the legal implications and requirements surrounding per diem payments for LLCs.

Per diem payments are typically used to cover daily travel expenses such as meals, lodging, and incidental expenses. Instead of requiring employees to provide itemized receipts for every expense, the company provides a flat daily rate based on the location and duration of the travel. This simplifies the reimbursement process and helps to streamline financial management.

While per diem payments can be a practical solution for larger companies, smaller businesses like LLCs may face certain limitations. When exploring the legality of per diem payments for your LLC, consider the following factors:

• Tax Deductibility: Per diem payments made by an LLC must be considered as ordinary and necessary business expenses in order to qualify for tax deduction. The IRS sets daily rates for per diem payments based on the location and duration of travel. It is important to review these rates and ensure that the amounts paid by your LLC fall within the IRS guidelines.
• Documentation: In order to claim per diem payments as tax deductions, you must maintain adequate records of the travel expenses. This includes documenting the date, location, purpose of the trip, and the daily per diem rate used. It is advisable to keep a travel log or use a digital tracking system to record this information accurately.
• Reasonableness: The IRS expects per diem payments to be reasonable and not excessive. When setting per diem rates for your LLC, it is important to consider the location, industry standards, and the actual costs associated with travel in that area. Per diem rates that are significantly higher than the actual expenses incurred can raise red flags during an IRS audit.
• Employee Classification: In order to pay yourself per diem as an employee of your LLC, you must ensure that you are properly classified. Generally, LLC owners are treated as self-employed individuals for tax purposes. If you are classified as an independent contractor or self-employed, you may not be eligible to receive per diem payments.
• State Laws: In addition to federal tax regulations, you must also consider the state laws governing per diem payments. Different states may have different requirements and limitations on per diem payments, so it is important to familiarize yourself with the rules specific to your state.

To ensure compliance with all legal requirements, it is advisable to consult with a qualified tax professional or accountant who is knowledgeable about per diem payments for LLCs. They can provide guidance and help you navigate the complexities of tax law to ensure that your LLC remains in compliance.

In summary, while per diem payments can be a convenient way to reimburse travel expenses, making sure your LLC follows all legal requirements is crucial. Stay informed about the applicable tax regulations, maintain accurate documentation, and ensure that you are properly classified for tax purposes. By understanding and abiding by the rules, you can enjoy the benefits of per diem payments while avoiding potential legal issues.

The Ultimate Guide to Determining if Someone is Traveling

How to calculate per diem payments for llc employees.

As a business owner of an LLC, you may have employees who need to travel for work purposes. In these cases, you may be wondering how to compensate them for their travel expenses. One common method of reimbursement is through a per diem payment.

A per diem payment is a daily allowance given to employees to cover their meals, incidental expenses, and lodging while they are on a business trip. It is a convenient way to handle employee travel expenses as it eliminates the need for employees to submit individual expense reports for every meal or expense incurred during their trip.

To calculate per diem payments for your LLC employees, follow these steps:

• Determine the per diem rate: The per diem rate is determined by the General Services Administration (GSA) and varies based on the location of travel. You can visit the GSA website to find the per diem rates for different cities and states. Make sure to select the appropriate rate for each location your employees will be traveling to.
• Determine the number of travel days: Identify the number of days your employees will be traveling for business purposes. This includes both the day of departure and the day of return, even if only partial days.
• Calculate the total per diem payment: Multiply the per diem rate by the number of travel days to calculate the total per diem payment for each employee. For example, if the per diem rate is $100 per day and an employee will be traveling for 5 days, the total per diem payment would be $500 ($100 x 5).
• Allocate per diem payment by expense category: Break down the total per diem payment into different expense categories, such as meals, incidental expenses, and lodging. Determine the percentage or dollar amount to allocate to each category based on your company's policies or IRS guidelines. For example, you might allocate 70% to meals, 10% to incidental expenses, and 20% to lodging.
• Communicate per diem policy to employees: Clearly communicate your company's per diem policy to your employees. Make sure they understand how the per diem payment will be calculated, which expenses are covered, and any specific rules or limitations.
• Document per diem payments: Keep records of per diem payments made to your employees. This includes the dates of travel, the per diem rates used, and the breakdown of the payment by expense category. These records will be valuable for tax purposes and for compliance with IRS regulations.

It's important to note that per diem payments are considered taxable income for employees, just like regular wages. Therefore, you will need to include per diem payments in your employee's W-2 form at the end of the year.

By following these steps, you can calculate per diem payments for your LLC employees accurately and ensure proper reimbursement for their travel expenses. This not only simplifies the process of handling travel expenses but also ensures compliance with tax regulations and company policies.

Why Doesn't Velocity Change as an Object Travels?

Per diem payments are a popular method used by businesses to reimburse employees for expenses incurred during business travel. In an LLC (Limited Liability Company) setting, there are several important considerations that need to be made before making per diem payments to employees.

• Eligibility: The first step is to determine which employees are eligible for per diem payments. Generally, the IRS allows employers to use per diem payments for employees who travel away from their tax home overnight. However, it is important to note that not all employees may be eligible for per diem payments. Independent contractors, for example, are not eligible for per diem payments.
• IRS guidelines: The IRS provides guidelines on per diem rates that employers can use for reimbursement. These rates vary depending on the location and duration of the travel. It is important to stay updated with the latest rates provided by the IRS and ensure that the per diem payments made by the LLC are within these guidelines. Failure to do so may result in additional taxes or penalties.
• Documentation: Proper documentation is crucial when making per diem payments. The LLC should maintain records that substantiate the business purpose of the travel and the amount of the per diem payment. This includes keeping copies of receipts, travel itineraries, and any other relevant documents. Documentary evidence is essential to support the deductibility of per diem payments in the event of an audit by the IRS.
• Alternative methods: While per diem payments are a common method used for reimbursement, it is not the only option available. LLCs may also choose to reimburse employees based on actual expenses incurred during travel. This method requires employees to keep detailed records of their expenses and submit them for reimbursement. It is important to weigh the pros and cons of each method and choose the one that best meets the LLC's needs.
• Consistency: When making per diem payments, it is important for the LLC to establish a consistent method of payment. This includes having a written policy that outlines the per diem rates, eligibility criteria, and payment procedures. By maintaining consistency, the LLC can ensure fairness and avoid any potential disputes or misunderstandings with employees.
• Tax implications: LLCs should be aware of the tax implications associated with per diem payments. While per diem payments are generally considered non-taxable to employees, certain conditions must be met. For example, the per diem rates must not exceed the federal per diem rates, and the employees must substantiate their expenses. It is recommended to consult with a tax professional or an accountant to ensure compliance with tax laws and regulations.

In conclusion, making per diem payments in an LLC setting requires careful consideration of eligibility, IRS guidelines, documentation, alternative methods, consistency, and tax implications. By following these important considerations, the LLC can ensure that per diem payments are made in a compliant and efficient manner.

Exploring the Timing of NBA Teams' Travel to Orlando

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Single Member Limited Liability Companies

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A Limited Liability Company (LLC) is an entity created by state statute. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner's tax return (a "disregarded entity"). A domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and affirmatively elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.

Owner of Single-Member LLC

If a single-member LLC does not elect to be treated as a corporation, the LLC is a "disregarded entity," and the LLC's activities should be reflected on its owner's federal tax return. If the owner is an individual, the activities of the LLC will generally be reflected on:

• Form 1040 or 1040-SR Schedule C, Profit or Loss from Business (Sole Proprietorship)  
• Form 1040 or 1040-SR Schedule E, Supplemental Income or Loss  
• Form 1040 or 1040-SR Schedule F, Profit or Loss from Farming  

An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship.

If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership.

Taxpayer Identification Number

For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN.

For certain Employment Tax and Excise Tax requirements discussed below, the EIN of the LLC must be used. An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number . See Form SS-4 for information on applying for an EIN.

A single-member LLC that is a disregarded entity that does not have employees and does not have an excise tax liability does not need an EIN. It should use the name and TIN of the single member owner for federal tax purposes. However, if a single-member LLC, whose taxable income and loss will be reported by the single member owner needs an EIN to open a bank account or if state tax law requires the single-member LLC to have a federal EIN, then the LLC can apply for and obtain an EIN.

Employment Tax and Certain Excise Tax Requirements

In August, 2007, final regulations (T.D. 9356) PDF were issued requiring disregarded LLCs to be treated as the taxpayer for certain excise taxes accruing on or after January 1, 2008 and employment taxes accruing on or after January 1, 2009. Single-member disregarded LLCs will continue to be disregarded for other federal tax purposes.

A single-member LLC that is classified as a disregarded entity for income tax purposes is treated as a separate entity for purposes of employment tax and certain excise taxes. For wages paid after January 1, 2009, the single-member LLC is required to use its name and employer identification number (EIN) for reporting and payment of employment taxes. A single-member LLC is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits and payments on Form 8849. See employment and excise tax returns for more information.

Joint Ownership of LLC by Spouse in Community Property States

Rev. Proc. 2002-69 addressed the issue of classification for an entity that is solely owned by husband and wife as community property under laws of a state, a foreign country or possession of the United States.

If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:

• Disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
• Partnership for federal tax purposes, the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.

A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.

A business entity is a qualified entity if;

• The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
• No person other than one or both spouses would be considered an owner for federal tax purposes; and
• The business entity is not treated as a corporation under IRC §301.7701-2.

Note: If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be "qualified joint ventures" (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses .

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The delaware incorporation pros since 1974, how to maximize tax savings for single-member llcs.

According to data from the Bureau of Labor Statistics, about 20% of small businesses don’t make it past their first year . A contributing factor to this statistic is the fact that many business owners do not take advantage of easy tax deductions.

If you set up your business as a single-member LLC, there’s a significant opportunity for you to reduce your tax burden. But how? In this guide, we’ll walk you through the key steps.

Tax Deductions and Write-Offs for Single-Member LLCs

Single-Member LLC owners can find significant cost savings for their business just by digging into the tax code.

Here are some less obvious business expense deductions that Single-Member LLCs can claim to significantly lower their costs:

• Home-Office Deduction – Deduct up to $1,500 if you run your business from your home. The home-office deduction is a standard deduction, which means it does not have to be itemized. 
• Mileage Deductions – You can deduct a standard mileage rate of 54 cents per mile when using your vehicle for business. Since this is a standard deduction, you do not have to itemize things like gas, insurance, depreciation or maintenance. 
• Cell Phone Deductions – Deduct your monthly phone bill if your cell phone is used for both personal and business purposes.
• Promotional Events Deductions – Costs related to promotional events for your business, including food, beverages, and room rent, can be written off.
• Subscription Deductions – You can deduct the cost of business-related magazine subscriptions, journals, or other types of publications.
• Licensing Fee Deductions – Any licensing fees related to operating your business are deductible.
• Employee Deductions – You can pay family or friends for assistance with business operations, and these costs are deductible.

How Do Single-Member LLC Taxes Work? 

The IRS treats Single-Member LLCs as “pass-through” entities for tax purposes. Pass-through taxation means that the business’s profits and losses pass through to the single member of the LLC. Business income appears on the LLC owner’s personal tax return. The business does not pay taxes directly and does not have to produce a tax return.

Here are the steps to pay taxes as a Single-Member LLC:

Step 1.) Prepare a Schedule C – All business income and deductible expenses are reported here each year.

Step 2.) Transfer Income to Form 1040 – Any remaining net income from the Schedule C is carried over to Form 1040.

The income on the Form 1040 tax return is subject to both your marginal income tax rate and self-employment taxes, which typically amount to around 15%. 

What is a Single-Member LLC?

A Single-Member LLC is an LLC that has just one owner. Single-Member LLCs are the most common type of business entity used by small business owners because. This is because Single-Member LLCs are easy to set up and operate. They also provide business owners with the legal liability protections that they need to run their business the right way. 

Single-Member LLCs are both versatile and flexible. Entrepreneurs use Single-Member LLCs to protect all types of businesses, one person consulting businesses, to large, real estate investment portfolios. 

What is an LLC Franchise Tax?

The Delaware Annual Franchise Tax is a flat fee of $300. A Delaware LLC needs to pay the Annual Franchise Tax every year after the company is formed. The Delaware Annual Franchise Tax fee does not change depending on business income. If a Delaware LLC is open in a given year, the company will owe Annual Franchise Tax for that  year. 

What if a Delaware LLC Does Not Pay its Franchise Tax?

A Delaware LLC will lose its “good standing” status if the company does not pay its Annual Franchise Tax on time. If the company does not pay its franchise taxes for more than 3 years, the state of Delaware will void the LLC. A voided LLC is no longer able to conduct business. 

Losing good standing status can also have a negative impact on the LLC Members. An LLC that is not in good standing with the state loses its limited liability protections that keep the LLC owners separate from the business. This leaves LLC Members vulnerable to personal liability risks related to the company.

When is the Delaware Annual Franchise Tax Due?

The Annual Franchise Tax for Delaware LLCs is due by June 1 each year following formation. You can make your franchise tax payments through the Delaware Division of Corporations website or defrantax.com. Beware of the hefty $200 late fee for missed franchise tax payments.

Optimizing your tax situation as a single-member LLC owner involves strategic steps to leverage tax deductions, understand pass-through taxation, and maintain your good standing through timely franchise tax payments. By following these steps, you can significantly reduce your tax burden and increase your business’s chances of thriving in its market.

When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go

Trans-Siberian Railway Prices

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Home » Prices and Trans-Siberian Tickets » Trans-Siberian Railway Prices

Ticket prices for the Trans-Siberian Railway also depend on the current ruble exchange rate.

Is the Trans-Siberian Railway expensive?

Before starting on your Trans-Siberian Railway adventure you naturally want to know what the entire trip will cost. Although this sounds like a simple question, it is pretty difficult to answer. The Trans-Siberian Railway price of travel depends on the following factors:

• Which travel class do I want to use? The price for a first class ticket is about three times the price of a 3rd class ticket
• Am I willing to buy the tickets myself and assume responsibility for the organisation of the trip?
• How many stopovers do I want to make? The more breaks, the higher the total price.
• What sort of accommodation do I want? Will it be a luxury hotel or will a hostel dormitory be sufficient?
• What tours and excursions would I like to go on?
• What is the current exchange rate for rubles?

Basically, everything from a luxury to a budget holiday is available. If you buy yourself a 3rd Class nonstop ticket at the counter, a few hundred Euros will cover the price. All you will experience is a week on the Trans-Siberian train and will see nothing of the cities on the way. There is, however, any amount of room for upward expansion. Everyone makes different choices about which aspects they are willing to spend money on. I personally prefer to save money on accommodation and railcar class, visit as many cities and do as many trips as possible. To enable better classification of your travel expenses I have contrasted two typical traveler types. In the third column you can calculate the total cost of your own journey on the Trans-Siberian Railway. Please keep in mind that these are only rough estimations and not exact prices.

The all-in costs seem fairly high at first. However, they cover everything and it is quite a long journey taking four weeks. Many people forget to consider that when looking at the list. We should also deduct the running costs for food and leisure at home. I think most visitors to this page will classify themselves somewhere between the two categories, that is around the € 2,000 – € 2,500 range. When comparing these prices with other travel packages, you get the impression that it is hardly worthwhile travelling individually on the Trans-Siberian Railway. Please keep in mind that most packages last no more than 14 days and you are herded like cattle through the most beautiful locations.

If you spend less time on the Trans-Siberian Railway you will, of course, pay less. I chose this particular travel length because I prefer not to do things by halves. If you fulfill your dream of travelling on the Trans-Siberian Railway, enjoy it and don’t rush things. But it’s up to you, of course. Try playing around with the form a bit to find the appropriate price for your trip.

• Trans-Siberian Railway Tickets »

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Cost of Living Estimator in Moscow, Russia

Currency: EUR USD --- AED AFN ALL AMD ANG AOA AUD AWG AZN BAM BBD BDT BGN BHD BIF BMD BND BOB BRL BSD BTN BWP BYN BZD CAD CDF CHF CLF CLP CNH CNY COP CRC CUC CVE CZK DJF DKK DOP EGP ERN EUR FJD FKP GBP GEL GGP GHS GIP GMD GNF GTQ GYD HKD HNL HRK HTG HUF IDR ILS IMP INR IQD IRR ISK JEP JMD JOD JPY KES KGS KHR KMF KPW KRW KWD KYD KZT LAK LKR LRD LSL LYD MAD MDL MGA MKD MNT MOP MRU MUR MVR MXN MYR MZN NAD NIO NOK NPR NZD OMR PAB PEN PGK PHP PKR PLN PYG QAR RON RSD RUB RWF SAR SBD SCR SDG SEK SGD SHP SLL SOS SRD STD STN SVC SYP SZL THB TJS TMT TND TOP TRY TTD TWD TZS UAH UGX USD UYU UZS VES VND VUV WST XAF XAG XCD XDR XOF XPF YER ZAR ZMW ZWL Sticky Currency

Members of your household:

Eating lunch or dinner in restaurants: 0.0% 2.0% 5.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% of the time

When eating in restaurants, you are choosing inexpensive restaurants: 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% of the time

Drinking Coffee outside of your home: A lot High Moderate Low No

Going out (cinema, nightlife, etc.): none very low (twice per month per household member) low (three times per month per household member) average (once per week per household member) high (twice per week per household member) very high (3-4 times per week per household member)

Smoking (household overall): packs of cigarettes per day

Alcoholic beverages (consume): A lot Moderate Low No

At home, we are eating: Western Asian food

Driving car: A lot Moderate Low No

Taking Taxi: Daily one round trip Two round trips per Week One round trip per Week One round trip per Month No

Paying for public transport tickets: Monthly, All Members Monthly, 2 Family Members Monthly, 1 Family Members On-Demand, around 5 round trips weekly per family member On-Demand, around 4 round trips weekly per family member On-Demand, around 3 round trips weekly per family member On-Demand, around 2 round trips weekly per family member On-Demand, around 1 round trip weekly per family member None

Sport Memberships: All Household Members 1 Household Member 2 Household Members No

Vacation and Travel: Three per year (one week each), relatively expensive Two per year (one week each), relatively expensive Once per year (one week each), relatively expensive Twice per year (one week each), relatively inexpensive Once per year (one week each), relatively inexpensive None

Buying Clothing and Shoes : A Lot Moderate Low

Rent: none Apartment (1 bedroom) in City Centre Apartment (1 bedroom) Outside of Centre Apartment (3 bedrooms) in City Centre Apartment (3 bedrooms) Outside of Centre Sharing a Room in 3 Bedroom apartment City Centre Sharing a Room in 3 Bedroom apartment Outside of Centre Mortgage for 1 bedroom apartment (approximate) Mortgage for 3 bedroom apartment (approximate)

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Live Updates: Cohen Says Trump Approved Payments at White House Meeting

Michael D. Cohen, Donald J. Trump’s ex-fixer, described a key element of the prosecution’s case against the former president, who is accused of faking business records. House Speaker Mike Johnson spoke briefly in support of Mr. Trump outside the courthouse.

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Michael Cohen

Trump’s former lawyer and fixer, who has said he made a hush-money payment to Stormy Daniels at Trump’s direction.

Michael Wilson ,  Jonah E. Bromwich and Maggie Haberman

Cohen recounts an Oval Office meeting. Here’s the latest.

Michael D. Cohen, the key witness in the criminal case against Donald J. Trump, described for jurors on Tuesday a White House meeting where he said Mr. Trump confirmed a plan to reimburse him for hush money paid to silence a porn star’s account of a sexual encounter.

Mr. Cohen, once Mr. Trump’s personal lawyer and fixer, also described sending bogus invoices to Mr. Trump’s business as part of the scheme to repay him for the $130,000 he paid out of his own pocket to the woman, Stormy Daniels, on the eve of the 2016 election. Mr. Trump is charged with 34 felony counts of falsifying business records related to the reimbursement, one for each document involved: 11 checks, 11 invoices and 12 ledger entries.

Key testimony: Much of the case hinges on Mr. Cohen, who offered his account of the meeting inside the Oval Office in February 2017. He testified that Mr. Trump — after previously ordering him to “just take care of” Ms. Daniels’s story — agreed to a reimbursement arrangement. He also described the checks he received, most of them signed by Mr. Trump. He is the only witness who is expected to offer direct evidence that Mr. Trump was involved in falsifying the records, making his credibility with the jury paramount to the case.

House speaker attends: The House speaker, Mike Johnson, Republican of Louisiana, was among those supporting Mr. Trump on Tuesday and spoke to reporters outside the courthouse. Two of Mr. Trump’s vanquished primary opponents, Gov. Doug Burgum of North Dakota and the businessman Vivek Ramaswamy, were in the courthouse. On Monday, Senator J.D. Vance, an Ohio Republican, attended the trial in what was widely seen as a possible test on the path to become Mr. Trump’s running mate .

Cohen recounted chaos: On Monday, Mr. Cohen’s testimony offered a front-row look at the 2016 Trump campaign during the seismic revelations that threatened the candidate’s appeal to female voters. Mr. Cohen recounted the “Access Hollywood” tape bombshell, a recording of Mr. Trump discussing how he had groped women, and said Mr. Trump credited his wife, Melania, with the strategy of calling it “locker-room talk.”

He also described efforts to bury unflattering stories using so-called catch-and-kill arrangements with David Pecker, the former National Enquirer publisher, and the “catastrophic” threat posed by Ms. Daniels’s account of a 2006 sexual encounter. Mr. Trump, who has steadfastly denied her account, was livid when he learned she might go public, Mr. Cohen testified, adding that Mr. Trump told him, “Just take care of it.” Here are the highlights of Monday’s testimony.

A fixer’s job: Mr. Cohen’s duties as fixer included the mundane, like micromanaging puff pieces about his boss. When The Enquirer was set to publish a story, he testified, Mr. Cohen stepped in to ask that it not mention Mr. Trump’s having dated a Penthouse model.

Jonathan Swan

We are now seeing text messages showing that Michael Cohen was trying to get Stormy Daniels booked on Sean Hannity’s Fox News program on Jan. 18, 2018, to deny that she'd had an affair with Trump. Cohen and Hannity were longtime friends and Cohen had even offered legal advice to Hannity.

These text messages from Cohen to Keith Davidson, Daniels's lawyer — which said things like “please call me” and “c’mon” — demonstrate Cohen’s relentlessness and zeal on behalf of Trump.

Maggie Haberman

Cohen is now being asked about the complaint letter he received from the Federal Election Commission about his payment to Stormy Daniels, which was filed by a good-government group after The Wall Street Journal published an article revealing the payment. He says his response to the commission was not false, but it was misleading.

Jonah Bromwich

As Cohen continues to testify about Daniels’s statements to the press at the time the hush-money payment became public knowledge, he has admitted to lying a number of times — he just said he knew one of the statements was a lie because he helped “craft it.” This could be helpful to the defense once cross-examination starts. But of course, Cohen has long admitted that he was lying for Trump.

Susan Hoffinger, the prosecutor, brought up the joint defense agreement that Michael Cohen was part of, which meant the lawyer defending him was aligned with Trump’s lawyers. She makes sure Cohen tells the jurors it was an advantage for Trump, as well as for Cohen.

Cohen is now testifying about the statement by Stormy Daniels in which she denied having had a “sexual and/or romantic affair” with Trump. Her lawyer at the time, Keith Davidson, testified that this statement was technically true, because they didn’t have a full affair. Prosecutors have apparently decided not to take that line: They just call Daniels’s statement false.

Kate Christobek

Cohen said that he made sure to tell Trump that he got the denial from Daniels “to get credit that I was continuing to ensure he was protected.” He wanted Trump to know that he had “stayed loyal.”

Justice Juan M. Merchan

Presiding Judge

Susan Hoffinger

Todd Blanche

Trump Lawyer

Former Trump Lawyer and Fixer

Dylan Howard

Former Editor of The National Enquirer

David Pecker

Former Publisher of The National Enquirer

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Keith Davidson

Stormy Daniels’s Lawyer

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Michael Cohen, in text messages he is reading aloud in court, instructed Keith Davidson, who was the lawyer for Stormy Daniels, to “write a strong denial” from Daniels, saying that she had not had an affair with Trump. This is a statement that jurors have seen many times — and that Trump was fined $1,000 for posting on social media about in a violation of his gag order.

At this point in the trial, much of this evidence is familiar to jurors. Prosecutors are hoping that Cohen brings it all together for them. He just sighed and shook his head in the direction of the jury box, in seeming disbelief.

Michael Cohen has reached the part of his story where news of his payment to Stormy Daniels has broken into the public sphere. This was the beginning of the end for Trump and Cohen. All of Cohen’s previous testimony has concerned a time when they were still allies. I’ll be curious to see if his demeanor changes now that he’s heading toward the break in their relationship.

Michael Cohen says that he was under a “tremendous amount of pressure” when he lied to Congress but that he was happy to have a lawyer paid for by the Trump Organization. This is a useful line of questioning for prosecutors, who are dealing with unfriendly witnesses here, some of whom are also still loyal to the Trump Organization. Cohen could help underscore what prosecutors hope the jurors will understand as those witnesses' mixed motivations.

Trump’s three lawyers are all furiously taking notes right now as Cohen admits to lying multiple times to protect Trump.

Michael Cohen is now being asked about his House testimony in connection with the Russia investigation. This is going to head toward questioning about his lying to Congress about discussions around plans to build a Trump Tower in Moscow. Cohen has said before this trial that he did it to protect Trump, and he’s poised to talk about it here.

Cohen notes that the Trump Organization was paying for his lawyer, and that he was part of a joint defense agreement. Cohen testifies he felt he “needed” the protection of the sitting president at the time.

Trump looks directly at Cohen on the witness stand as he says that he lied for Trump “out of loyalty and in order to protect him.”

Susan Hoffinger is now walking Michael Cohen again through his testimony from yesterday about “monetizing” his role as Trump’s personal lawyer by using it to attract other clients. Cohen confirms he did. Much of this feels like inoculation against what Cohen is going to face during cross-examination.

Trump turns and whispers to his lawyer Emil Bove as Cohen talks about how much money he made by monetizing his relationship with him. Trump clearly mouths “four?” And Bove clearly mouths back: “$4 million.”

Michael Cohen is being asked about some additional work he did for the Trump Organization, some of it legal work, including for the Trump Organization’s general counsel, Alan Garten. Cohen is saying he didn’t expect to be paid for that work and did not send invoices for it. Trump’s lawyers have indicated that they may argue that Cohen was doing real legal work, and was being paid for that. So this may be an example of the prosecution seeking to air an argument before the defense can.

Jesse McKinley

Cohen is asked to estimate how many hours of legal (or quasi-legal) work he did for Trump in 2017. His best guess? “Less than 10.”

Cohen is now saying he did some legal work for Trump in 2018. It was in response to Stormy Daniels wanting to go public, and Trump wanting an arbitration action filed against her over her nondisclosure agreement. He says he was contacted by Eric Trump, as well as by Trump himself.

Catie Edmondson

Speaking to reporters outside the courthouse, Speaker Mike Johnson just accused prosecutors of advancing a “sham” trial against “one president to provide cover for another.” His comments came a week after Johnson put down an ouster attempt by Representative Marjorie Taylor Greene of Georgia, who had criticized the speaker of not doing enough to defend Trump.

“I came here, again, today, on my own, to support President Trump, because I am one of hundreds of millions of people — and one citizen — who is deeply concerned about this,” Johnson said.

It’s worth noting that Trump, minutes after the vote had actually taken place, had encouraged House Republicans on social media not to oust Johnson — at least not yet. “We’re not in a position of voting on a motion to vacate,” his post said. “At some point, we may very well be, but this is not the time.”

We’re continuing to see the series of documents that prosecutors say are false, and continuing to think about yesterday’s testimony. When Cohen was describing the January meeting with Allen Weisselberg, he testified that Trump had heard Weisselberg say that the monthly payments would be a retainer for legal services. It is that single line from a witness — the word “yes” — that most directly attaches Trump to the alleged crimes.

Prosecutors are arguing that Trump’s sign-off on the repayment plan, along with his knowledge that Cohen would be falsely reimbursed for “legal services,” indicates that he approved of what they say was a crime.

There’s mountains of documentary evidence that Cohen was paid for legal services he didn’t actually provide, and that these were reimbursements. The question of what Trump knew relies mostly on Cohen’s testimony.

Michael Cohen is going through check stubs for the first two checks and saying the descriptions of them were “false.” Cohen says both Eric Trump, who is sitting in the courthouse, and Allen Weisselberg signed the first two, from the former president’s revocable trust account. At some point, it switched to Trump’s personal account.

Cohen is now testifying about checks Trump started signing himself, from his personal account.

The jurors seem to be listening, with some following along with documents shown on screens in front of them.

Susanne Craig

Cohen is being asked about the invoices one by one. “Is that a false record,” he is asked over and over. “Yes ma'am,” he typically responds.

One of the prosecutors, Joshua Steinglass, asked prospective jurors during jury selection whether they could believe that a person could be guilty for a crime even if they did not commit the crime themselves: He used the example of a husband hiring a hitman to murder his wife, and asked jurors whether they believed the husband would be just as guilty as the hitman.

So what prosecutors are asking jurors to believe is that Trump, by signing off on the repayment plan and showing some knowledge of it, is the person who ultimately commissioned the crime, even if he did not execute it.

And this is why Cohen is so important. This all relies on his word. The defense is likely to attack his credibility and call into question whether he can be believed about what happened in these two conversations.

Michael Cohen is now explicitly testifying that the invoices he was sending, which he has sought to tie to Trump, were false documents.

He is going over the monthly invoices he created, which described him as having been paid for “services rendered,” and testifying that they were false records. He stresses they weren’t valid legal fees, but “reimbursements.”

Michael Cohen confirms that in response to the false invoices, he received 11 checks in 2017 totaling $420,000.

Prosecutors have now moved on to questioning Michael Cohen about how Trump’s company, the Trump Organization, responded after the repayment plan was created. Cohen has tied Trump to authorizing the plan, but what we'll hear about the two meetings in which he purportedly did so will come entirely from Cohen’s testimony. We’ve seen documentary evidence that shows he had those meetings. But we can’t know, other than by trusting Michael Cohen, what was said.

That was a really key piece of testimony — as we said before, in prosecutors’ own statement of facts, this is the only time that Trump is actually said to have confirmed the repayment plan, which prosecutors say involved the payments being illegally disguised. But that meeting slid right by during the testimony, with Trump only explicitly acknowledging to Cohen, it sounded to me, like he knew about the two checks that Cohen would receive in January and February.

Michael Cohen is now describing meeting with Trump in the Oval Office in February 2017. He says that Trump asked him if he needed money, and that he said no, he did not need any extra. He then said Trump asked him to “deal with Allen,” meaning Weisselberg, who had arranged the repayment plan for the hush money. Trump also said, Cohen testified, that he’d receive a check for both January and February.

Now, prosecutors have posted a picture of Cohen visiting the White House at the time. Jurors have already seen the picture — but now they know its import. At the meeting, Trump showed direct knowledge of the repayment plan, per Cohen’s testimony just now.

Susan Hoffinger, one of the prosecutors, has returned to questioning Michael Cohen, asking him about meeting with Trump in January 2017 and discussing getting reimbursed for his payment to Stormy Daniels. Cohen is being shown an email sent a month later by Jeffrey McConney, the Trump organization's controller, about the “invoices.”

These invoices were shown in court as part of McConney’s testimony. They were for $35,000 a month, over 12 months, totaling the $420,000 that Trump allegedly paid back to Cohen after Cohen paid off Stormy Daniels. The sum included a bonus and tax-related gross ups, plus $50,000 for tech services.

Cohen says he simply “copied and pasted” his rolling monthly invoices for the $35,000.

Michael Cohen is called to the stand, wearing a dark suit and a pale blue tie. He appears to be walking with a bit of a tilt.

Cohen walked by Trump as he took the witness stand. He didn’t look at his former boss, who was speaking with his lawyers as Cohen passed.

Vivek Ramaswamy, who is seated directly behind Trump, is writing in a notebook. Trump’s allies have taken to publishing on social media their own pro-Trump accounts of the courtroom proceedings. Ramaswamy has already posted on X that he will be sharing live updates from the courtroom.

Great to see President Trump in good spirits this morning. Headed to NYC courtroom now. Let’s see what’s going on down there, will share my thoughts over the day. — Vivek Ramaswamy (@VivekGRamaswamy) May 14, 2024

It’s worth noting that lawyers with the defense are allowed to have phones, but members of the general public are not. The Trump team has been pressing the rules on this for weeks now, and a political ally live-tweeting from the courtroom would be a whole new thing.

The judge is on the bench and we are set to begin.

As we await the judge, it’s a good time to offer a preview of this morning’s testimony. We don’t know exactly what Michael Cohen is going to say. But we know the contours of the prosecution’s case: the former fixer is expected to testify that he met with Trump in the Oval Office in February 2017, and that Trump signed off on what prosecutors say was a crime: the plan to disguise the reimbursements to Cohen as payments for legal services.

Benjamin Protess

While anything is possible when Cohen is on the stand, I’m expecting him to drill down on that Oval Office meeting, and the importance of that testimony cannot be overstated. He is the only witness expected to offer direct evidence that Trump was involved in falsifying the records.

Cohen’s testimony, if the jury finds it credible, could give prosecutors exactly what they need to tie Trump to the records he is accused of falsifying. The case could hinge on today’s testimony.

It's interesting to note that Allen Weisselberg, who was the longtime chief financial officer of the Trump Organization, is unlikely to appear at the trial for either the defense or prosecution to corroborate or deny any details. That’s because Weisselberg is currently serving a jail term on perjury charges from a separate legal case related to Trump. And it seems at this point as if the jurors will not get much of an explanation for why they won’t hear from Weisselberg.

Trump is seated at the defense table and has been whispering back and forth with his lead lawyer Todd Blanche, who is expected to begin cross-examining Michael Cohen as soon as today.

Blanche is in the chair closest to the lectern, which signifies that he will be the one to cross-examine Cohen. It’s a really big moment for Blanche, who has fashioned his current career around representing Trump, but who has never been a defense lawyer in a trial like this.

Trump walks into the courtroom, trailed by Doug Burgum, Vivek Ramaswamy, and Eric and Lara Trump, in addition to two advisers, Boris Epshteyn and Alina Habba, and the actual lawyers on the case. Speaker Mike Johnson, who’s set to speak outside the courthouse in less than an hour, doesn’t appear to be here.

Word has gone out to Trump allies over the past few days that Trump wants to see a bigger show of support inside the courtroom. The cavalry has arrived, led by J.D. Vance yesterday. Vance’s appearance in court has generated an incentive for others who hope to be Trump's running mate to get to Manhattan fast.

Trump's entourage is big enough today that they are having trouble arranging themselves in the two rows of seats set aside for supporters of the defense's side.

The prosecutors walk in, laden down with just one box today, as well as bags and folders filled with documents. One of them, Susan Hoffinger, is expected to resume her questioning of Michael Cohen this morning.

Neil Vigdor

Liz Cheney, the former G.O.P. congresswoman and an outspoken Trump critic, assailed Speaker Mike Johnson for his impending appearance outside the courthouse where Trump's hush-money trial is taking place. “Have to admit I’m surprised that @SpeakerJohnson wants to be in the ’I cheated on my wife with a porn star’club,” she wrote on X . “I guess he’s not that concerned with teaching morality to our young people after all.”

Have to admit I’m surprised that @SpeakerJohnson wants to be in the “I cheated on my wife with a porn star” club. I guess he’s not that concerned with teaching morality to our young people after all. https://t.co/wTHWvA1m85 — Liz Cheney (@Liz_Cheney) May 14, 2024

An adviser to Speaker Johnson says Trump did not solicit his support. “The Speaker volunteered to come today to support his friend, President Trump, and was not proactively invited by the campaign,” an aide says.

Trump has been rolling heavy with support from Republican elected officials this week, which we expected for Michael Cohen’s testimony. Today, Trump will be joined by the House speaker, Mike Johnson, as well as North Dakota’s governor, Doug Burgum, a contender to be Trump's running mate. Also present will be Representatives Byron Donalds and Cory Mills of Florida, and Vivek Ramaswamy, who was one of Trump's primary rivals this year. Both Donalds and Ramaswamy are longshot hopefuls to be Trump's running mate.

This show of force is significant given that the cross-examination of Cohen by Trump’s lawyer Todd Blanche is expected to start today, and the Trump team hopes that Cohen will unravel on the stand.

The lines to get into court today were crazy long, and tensions were running high in the public line. People started queuing Monday night, hoping to get one of the coveted spots in the courtroom. One woman outside said she paid $750 for a line sitter. “It’s better than a Broadway show,” she told me. Trouble started early though, when a few people butted into line, sparking some tense exchanges. Then a man at the front of the line sold his spot to two people, purportedly for $2,000, causing further consternation.

The members of the public who were jostling for prime spots in line outside just started filing into the overflow room at the courthouse. Some have sleeping bags and pillows, which are now tucked under the wooden benches.

Good morning from the Manhattan Criminal Courthouse, where Michael Cohen is expected to return to the stand. On Monday, he testified that in 2016, while a candidate for president, Trump had directed Cohen to pay hush money to a porn star to bury her story of having had sex with Trump a decade earlier. After he was elected president, Trump signed off on a repayment plan, Cohen said.

Today, he is expected to testify about what prosecutors say is the actual crime: the falsification of business records that were used for the repayment. And then, the defense lawyers may start cross-examining Cohen, and they will likely seek to make him look like a liar who is out for revenge.

Jonah E. Bromwich and Charlie Smart

This is what it’s like inside the courtroom for Trump’s trial.

Witness stand

Reserved seating for

district attorney's office

Prosecutors

Donald Trump

usually sits here

Secret Service and defense

Charlie Smart / The New York Times

A dimly lit room on the 15th floor of an Art Deco courthouse in Lower Manhattan is the stage for the mostly closely watched legal drama in decades: the first criminal trial of an American president.

Former President Donald J. Trump’s trial on 34 felony counts is being held in a large courtroom that has the air of a grand structure gone to seed: The floors are grimy, the wooden benches unforgiving and the temperature swings from frigid to sweltering.

Members of the public and reporters get 14 rows, five on each side, inside the wood-paneled courtroom, behind the prosecution and defense tables. Those seats provide a view of the judge — the bench sits directly under burnished letters spelling out “In God We Trust” — and the witness stand. The jurors sit on the right side and are usually focused on the witness stand or the lawyer speaking at the lectern.

Four large closed-circuit television screens also make it possible to see the faces of those at the prosecution and defense tables, including Mr. Trump. The former president usually sits in the second chair, with the defense lawyer who is handling arguments or questioning a witness occupying the first. When lawyers approach the bench for a sidebar, Mr. Trump is sometimes left alone at the table. Other times, a lawyer who is not taking part moves to sit beside him briefly.

Despite its size, the courtroom is nonetheless too small to contain all those wanting to catch a glimpse of the trial. Additional members of the news media and the public can follow along in the so-called overflow room, where the same video feed is shown.

The feed is not shared beyond the overflow courtroom; New York State generally does not permit trials to be broadcast. The only glimpses of the courtroom available to the broader public come from courtroom sketch artists and images from photographers who are permitted inside for 45 seconds, just before court goes into session.

The New York Times usually has two reporters inside the main courtroom and several others in the overflow area to provide a steady stream of updates on arguments, testimony, evidence and Mr. Trump’s disposition — sometimes with the help of binoculars to get a better look at the screens.

The prosecution and defense get two rows each. On the prosecution side, those benches have seated members of the Manhattan district attorney’s office, including the district attorney himself, Alvin L. Bragg . On the defense side, Secret Service agents take up some of the seats, along with supporters of the former president. Mr. Trump’s son Eric, who has been seen in the courtroom repeatedly, is the only member of the Trump family who has attended so far.

The temperature inside is often a step behind New York’s shifting spring weather: Frequently too hot or too cold, it seems to lag the outside temperature by a day or two.

The chill that pervaded during jury selection at one point prompted the judge in the case, Juan M. Merchan , to apologize to prospective jurors. When Mr. Trump’s lead lawyer, Todd Blanche , inquired about raising the temperature, Justice Merchan said the only alternative to shivering was sweating — and he’d rather be cold.

Mr. Trump has also groused about the cold, remarking during his arrival one morning that he thought the temperature was being kept low “on purpose.” And departing the courtroom for a break at another point, he remarked to reporters in the last row: “Is it cold enough?”

Ben Protess ,  Jonah E. Bromwich and Maggie Haberman

Michael Cohen is a fixer turned antagonist to Donald Trump.

With the loyalty of a surrogate son, Michael D. Cohen kept his boss's secrets and cleaned up his messes. He described himself in his memoir as Donald J. Trump’s “designated thug.”

Now Mr. Cohen is the central witness against his former boss in the first criminal trial of an American president. He began his testimony on Monday , describing how he buried stories his boss didn’t anyone to read — including a porn star’s account of a sexual encounter.

Mr. Cohen testified that he had paid $130,000 in hush money to the woman, Stormy Daniels, at Mr. Trump’s request, and that Mr. Trump signed off on the plan to reimburse him. That reimbursement is central to the case: Prosecutors say Mr. Trump falsified records to disguise the payments as legal expenses.

In the years since, Mr. Cohen has gone to jail, published books, and transformed himself from Mr. Trump’s lackey to his chief antagonist.

Mr. Cohen, the son of a Holocaust survivor, had idolized Mr. Trump since his youth on Long Island. After graduating from Cooley Law School in Michigan, he joined a personal injury firm.

And after buying apartments in two of Mr. Trump’s New York buildings in the early 2000s, he caught Mr. Trump’s eye during a dispute with the condo board at Trump World Tower in New York and soon joined his business, the Trump Organization, as a sort of do-it-all fixer.

Colleagues spotted him inside Mr. Trump’s office, overheard him yelling from his own and watched him walk the hallways with a pistol strapped to his ankle.

Occasionally, he performed tasks that approximated legal work under the amorphous title of executive vice president of the Trump Organization and “special counsel” to Mr. Trump. But more often than not, Mr. Cohen’s tasks were unrelated to the law — and sometimes, at odds with it.

In testimony before Congress, Mr. Cohen estimated that over the years he had made 500 threats at Mr. Trump’s behest.

And Mr. Cohen, who indulged his own political aspirations as a failed City Council candidate, was one of the strongest believers in Mr. Trump as a possible president when he flirted with running in 2012. Mr. Cohen set up a website, ShouldTrumpRun.org, and went on a scouting trip to Iowa.

Although he had no formal role in the 2016 campaign, Mr. Cohen nonetheless raised millions of dollars, recruited Black supporters and was an enthusiastic booster of Mr. Trump on television.

But his greatest service came behind the scenes, arranging payoffs to two women who had threatened to go public with stories about having sex with a married Mr. Trump. One, Karen McDougal, struck a $150,000 deal with Mr. Trump’s allies at The National Enquirer , who bought and buried the former Playboy model’s story.

The second woman was Ms. Daniels, who described her encounter with Mr. Trump in graphic detail on the witness stand last week. When Mr. Trump was slow to pay the $130,000 hush money, Mr. Cohen dug into his own pocket.

Mr. Trump repaid him monthly throughout the first year of the presidency. Mr. Cohen was no longer a Trump Organization employee, and Mr. Trump had excluded him from a job in Washington. But Mr. Cohen’s email signature now carried a loftier title: personal lawyer to the president.

Jesse McKinley and Kate Christobek

Cohen testimony begins the crux of the case against Trump: Here are 5 takeaways.

Michael D. Cohen, once one of Donald J. Trump’s closest confidants and his loyal protector, offered an account Monday that could convict the man he used to refer to as “boss” and now calls an enemy.

Testifying in the first criminal trial of an American president, Mr. Cohen said that he had made a $130,000 payment to Stormy Daniels, a porn star who in testimony last week described a brief sexual encounter she said she had with Mr. Trump in 2006. On the stand Monday, Mr. Cohen said he paid Ms. Daniels to ensure her silence before the 2016 presidential election, saying her story would have been “catastrophic.”

The $130,000 payment led to the charges against the former president: that Mr. Trump falsified 34 business records to hide a reimbursement to Mr. Cohen. Mr. Trump, 77, has denied the charges and says he did not have sex with Ms. Daniels. If convicted, he could face prison or probation.

Here are five takeaways from Mr. Trump’s 16th day on trial:

Cohen said Trump’s wife suggested ‘locker-room talk.’

According to Mr. Cohen, Mr. Trump’s wife, Melania, offered a oft-quoted turn of phrase after the “Access Hollywood” tape was revealed in early October 2016, a recording in which Mr. Trump bragged about grabbing women’s genitals. Mr. Cohen said that, according to Mr. Trump, she recommended calling it “locker-room talk” to explain it away.

That wasn’t her only mention Monday. Mr. Cohen contradicted one possible defense argument — that Mr. Trump paid Ms. Daniels only because he was worried about her story’s effect on his family and marriage. He said that the former president “wasn’t thinking about Melania” when Ms. Daniels’s story threatened to become public.

“This was all about the campaign,” Mr. Cohen said.

Mr. Cohen said that when he mentioned both Ms. Daniels and Karen McDougal, a former Playboy model who also said she had an affair with Mr. Trump, the candidate’s reaction had to do with them both being “beautiful.”

Cohen brought four weeks together in one day.

Since testimony began April 22, prosecutors have been stitching together the motive and methods of the $130,000 payment, using phone logs, emails, text messages and witness testimony. Mr. Cohen brought many of those moments to life, describing Mr. Trump’s micromanagement and his campaign’s panic after the release of the “Access Hollywood” tape.

Mr. Cohen also bolstered testimony by David Pecker, the former National Enquirer publisher, establishing a deal to suppress unflattering stories about Mr. Trump. And he ratified the account of Keith Davidson, Ms. Daniels’s onetime lawyer, about buying her story.

But Mr. Cohen’s credibility will be aggressively challenged during cross-examination. Whether the jury finds Mr. Cohen believable could determine its verdict.

The Links Between Trump and 3 Hush-Money Deals

Here’s how key figures involved in making hush-money payoffs on behalf of Donald J. Trump are connected.

A cryptic phrase could be damning.

It was a direct accusation of intent: Mr. Cohen said that Mr. Trump had made it clear in late October 2016 that he wanted to pay off Ms. Daniels.

“He expressed to me, ‘Just do it,’” Mr. Cohen said.

He also said that during a conversation with Mr. Cohen and Allen Weisselberg, then the Trump Organization’s chief financial officer, Mr. Trump had been apprised of the plan for Mr. Cohen to pay Ms. Daniels and then be repaid.

That arrangement forms the basis for the charges of falsifying business records. “Once I received the money back from Mr. Trump, I would deposit it and no one would be the wiser,” Mr. Cohen said.

Gagged, Trump is letting other allies attack the case.

For some Republicans, the trial is an opportunity to show loyalty to the former president, and burnish their reputations in his eyes.

On Monday, that included Senator J.D. Vance of Ohio, considered a possible vice-presidential candidate. He also held a news conference blasting Democrats, whom he and Mr. Trump blame for the case, and Mr. Cohen. It was public criticism of a witness whom the defendant is barred from attacking because of a gag order.

Mr. Vance was just the latest Republican to drop by. Senator Rick Scott of Florida and Ken Paxton, the Texas attorney general, have visited in weeks past.

On Monday, Senator Tommy Tuberville, a former football coach from Alabama, complained about the courtroom’s aesthetics.

“That courtroom,” he said, “is depressing.”

Cohen was described as a maniac. But he wasn’t one Monday.

Prosecutors had allowed witnesses to disparage Mr. Cohen, presumably to get ahead of defense arguments about his being unreliable. People painted him as a maniac, an explosive figure with an ax to grind. That could blunt the defense’s cross-examination, which could cover his time in federal prison.

But the Michael Cohen on the stand was calm. He did describe his temper flaring, including when he saw his bonus sharply cut for 2016, which he called “insulting.”

“I didn’t expect more,” he said. “But I certainly didn’t expect less.”

Mr. Cohen’s direct examination by prosecutors — who said last week that they may finish with their witnesses this week — will continue Tuesday morning. The defense will surely try to rattle his composure later in the day, when cross-examination is expected to begin.