What expenses are tax-deductible for law firms?
As we approach tax season, it’s time to start thinking about—and gathering the paperwork for—expenses that are tax-deductible.
We’ll review some of the most common deductions for law firms.
For lawyers who accept online payments, including via credit cards, the convenience fees are tax-deductible.
While this used to be a rarity, accepting online payments has become increasingly common for law firms—especially with the help of legal-specific merchants, like LawPay, which set you up to accept credit card payments in a manner that keeps you compliant.
Continuing legal education that’s required by your state bar or to keep your license is deductible, too.
Likewise, books and legal subscriptions that help you maintain or improve your knowledge are also eligible. And you can deduct reference expenses, computer-related costs, and software.
You can add marketing, promotion, and advertising expenses to the list. This means hiring professional services for a blog, advertisements online, and networking expenses. Even taking clients out to dinner—so long as you are truly talking about business—can be deductible.
Given the pandemic, many lawyers will likely be writing off home office expenses in 2020. To claim this deduction, your home does need to have been your primary place of work for the past year.
There are two ways you can claim your home office. First, you can determine the square footage of your designated home office as a percentage of your home’s overall space and determine the correlating percentage of your home expenses that were spent on your office.
Or you can use the safe harbor method, which allows you to calculate the expense of your home office by using $5 per square foot—up to 300 square feet (or $1500).
Finally, we recommend using a practice management system to streamline your financial record-keeping to make tax season a little less stressful. Besides, it’s tax-deductible.
1. 10 Common Small Business Tax Deductions
2. IRS Offers New Method for Home Office Deductions