Today’s question is “what record keeping do you need for taxes, specifically what paperwork do you need to keep to make sure the IRS is happy?” As a personal chef, what items are tax deductible?
Per the IRS, “You must keep records, such as receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on a return as long as they may become material in the administration of any provision of the Internal Revenue Code, which generally will be until the period of limitations expires for that return.”
I’m Virginia Stockwell and my channel is all about becoming a personal chef. You’re welcome to read this blog article or check out the video below.
What do you keep in a Mileage Log?
Per the IRS, “If you use your car only for business purposes, you may deduct its entire cost of operation (subject to limits). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use. You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.”
At the end of the tax year, there’s a vehicle specific form to file and one of the questions is, “did you keep a mileage log?” It would be impossible to wait until the end of the year and then decide to do a mileage log. I promise, you can’t do it.
At the beginning of each year, start a new mileage log. The IRS wants to see beginning mileage, end mileage and a description of what’s happening during that trip. Descriptions could be, “I’m driving to Mrs. Jones’ house for a meal prep session” or “I’m going to the grocery store, then Mrs. Jones’ house, then picking up some kitchen equipment.”
As a personal chef, what expenses are tax deductible?
Per the IRS, “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
With each tax deductible item, written proof is mandatory. Organized record keeping and creating an organized filing system is key.
Dumping everything into a giant folder and telling yourself, “at the end of year, I’ll sort it out,” is asking for procrastination. If you create a filing system at the beginning of each year, then file as you go, you’re going to save so much more time when tax filing comes around.
Your New Printer is Tax Deductible!
You probably already know that office supplies are tax deductible including a new printer, printer ink, printer paper, pens, staples, you get the idea. All office supplies are tax deductible because they’re related to your business.
Cookbooks, Classes, Seminars
Did you know that you could deduct cookbooks, cooking classes and cooking seminars locally, far away, or online? These are all educational expenses. You get to fuel your passion learning more about cooking and it’s all tax deductible. Bonus!
Research & Development Groceries
After learning new recipes and cooking techniques through cookbooks and classes, you’ll have to test them out and of course will need groceries. Because you’re testing out recipes that will be offered clients in the future, you can tax deduct those groceries. Be sure and keep all the grocery receipts!
Cameras and Video Cams
After creating new recipes, you’ll need to take photos and videos for use in marketing materials. To do that, you’ll need a camera, which will be tax deductible as a business use item.
You’re getting the idea here. Everything that’s related to your business is going to be tax deductible. Let me add the disclaimer, “I’m not a CPA.”
Can a Cell Phone be Tax Deductible?
If you use your cell phone for business only use, purchasing the phone and any minutes or monthly charges related to the phone are tax deductible. If it’s for personal and business, you’ll have to divide the minutes and make calculations to determine your business only costs.
Costco and Sam’s Club Memberships
You go to a monthly business networking event downtown and it’s $40 a year to join. That’s tax deductible as well as any memberships to Costco if you’re purchasing groceries for events or meal prep. Any kind of grocery store memberships used for business purposes are tax deductible. Mileage to and from those networking events and grocery store visits should be entered into your mileage log.
Accounting & Bank Fees
Any accounting software such as Quickbooks are tax deductible along with bank-related fees such as checking account fee for a business checking account. If you hire a CPA to do your business taxes, that’s a tax deductible item.
Trash bags, paper towels, sponges
You can also deduct any consumables you bring to appointments. That’s everything from trash bags, plastic wrap, foil, sponges and dishwashing liquid.
Is work clothing tax deductible?
All your marketing is tax deductible such as whenever you purchase a website domain, monthly hosting and any marketing related to that, any business cards you have created, brochures and embroidered work shirts.
If you purchase, however, work pants that do not have a logo on them, that’s a little iffy with the IRS. They’re saying those work pants can be used, even though they probably aren’t, outside work, they’re not tax deductible. The same goes with work shoes. You probably purchased those work shoes specifically for work, but the IRS is saying because you can technically wear those work shoes outside of work, they are not tax deductible.
Any subscriptions you may be using for graphic design like Canva are tax deductible. If you hire a graphic designer or a bartender for an event, it’s tax deductible as well as your business liability insurance, business license itself and annual fees.
Your Home Office is Tax Deductible!
Your home office is a huge tax deductible expense. Home office includes everything from purchasing equipment inside your office to the square feet of the office being deducted from your mortgage payment and mortgage insurance. If you do any remodeling in that room like painting or putting up new closet doors, it’s tax deductible as home office expenses along with any storage areas you have like refrigerators or catering equipment in a storage area. That square footage of your home is also tax deductible just as your home office would be.
Per the IRS, ” If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.”
There’s a simplified version and an itemized version. “Taxpayers using the regular method, instead of the optional method, must determine the actual expenses of their home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the regular method, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.”
Is the home office deduction for every personal chef?
Can you personally deduct for home office? Per the IRS, “You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.” “You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.”
I think I covered just about everything that can be tax deductible. If there’s anything I missed, please mention it below because I don’t want anyone else to miss it too!
DISCLAIMER: For further questions, refer to IRS publications and forms. Again, I’m not a CPA. I’m providing information generally about what could be tax deductible. Every situation is different and just because I mentioned an item as tax deductible, it may not be tax deductible for you.
My record keeping system
As far as record keeping, I personally keep a spreadsheet with all necessary tax records plus a little tablet as a mileage log kept in the car. It’s alll free! Well, now Microsoft charges $70 a year as a subscription model instead of purchasing software outright, I’m learning.
A lot of people use Quickbooks for their accounting (starts at $12/month), but I have everything in an economical spreadsheet (Microsoft Office $70/year and I am not an affiliate of either). I have the spreadsheets aligned in tax categories and have lined up the columns to add themselves. At the end of the year, I move the totals of each column over to Turbotax (I am not an affiliate, but very much use this product) and can complete my taxes in a very short time. As a business, you hopefully already know that it’s a red flag for an audit to the IRS to do your taxes by hand!
If you’re handy with a spreadsheet or if you have a friend who can set you up with a good accounting spreadsheet, that’s an alternative to using accounting software. I’m not stating one recommendation over another. You should use what works best for you.
How to Become a Personal Chef
I hope you found “as a personal chef, what’s tax deductible” helpful and feel inspired to create a dedicated filing system! If you have any questions, feel free to ask anytime.
I have a workshop coming up if you’d like to let me know of your interest.
If you are a personal chef and need more clients, here’s the link to my handout, “9 Ways to Get New Clients.”
Personal Chef Questions Welcome!
Virginia Stockwell has been in the professional catering and personal chef business since 2005. She offers mentoring advice at VirginiaStockwell.com and her YouTube channel “How to Become a Personal Chef”.