How to Deduct Rent & Lease expense on agenda C, Line 20

1040 Self Employed Health Insurance Deduction - How to Deduct Rent & Lease expense on agenda C, Line 20

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There are well dozens if not hundreds of deductible expenses ready to the typical Sole Proprietor. Some of these are more clear than others, such as rent and lease expense. Let's take a closer look to make sure you're not missing out on this deduction.

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1040 Self Employed Health Insurance Deduction

Schedule C, Line 20 provides two sub-categories for this expense:

Line 20a - Vehicles, machinery and equipment. Let's start with "machinery and equipment" first. Businesses often lease office tool like computers, copy machines and the like. If the tool is being used 100% for business, then the lease cost is 100% deductible. As far as vehicles are concerned, it is more likely that you are not using the vehicle 100% for business, as most Sole Proprietors drive the same car for both enterprise and personal use. If that's the case, you'll have to do an funds of the cost based on the enterprise use percentage, which is calculated by dividing enterprise miles by total miles. Then apply that enterprise use division to the cost to resolve the deductible portion.

Keep in mind, too, that this cost is only deductible if you are using the Actual cost Method. If you are using the Mileage Rate Method, then the lease cost is not deductible at all. The Mileage formula uses the Irs-authorized standard mileage rate to resolve your vehicle expense, in lieu of actual expenses such as lease, gasoline, maintenance, repairs, insurance, etc.

Line 20b - Other enterprise property. This is where you description the most tasteless type of rent or lease expense: the cost of renting your office, store, warehouse, or other industrial building. For many small enterprise owners, this is one of your largest expenses, if not the largest. So don't forget to deduct it!

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