What is a guestimate or average tax deduction for an entrepreneur between the ages of 18 and 30?

What is a guestimate or average tax deduction for an entrepreneur between the ages of 18 and 30?

The average tax deduction per category can vary widely based on several factors, including the size of the business, the industry, geographic location, and how much the business spends in each category. Additionally, tax codes and regulations, which can differ significantly from one country to another and even within regions of the same country, greatly influence these averages. I added a rough estimate in bold font to just put a number to estimates these general insights as average deductions for common categories, but keep in mind these are very rough estimates and can vary:

1. Home Office Expenses: The deduction can vary based on the size of the home office space as a percentage of the home and the associated costs (rent, utilities, etc.). The IRS, for example, offers a simplified option that allows deducting $5 per square foot of the home used for business, up to 300 square feet, totaling up to $1,500. ($1500)

2. Office Supplies and Equipment: This can range from a few hundred to several thousand dollars, depending on the nature of the business and its operational needs. ($3000)

3. Internet and Phone Bills: For small businesses, this might average from $50 to $250 per month, depending on usage and services required. ($150 per month 150×12= $1800)

4. Travel Expenses: This category can have a wide range, with some businesses spending nothing and others, especially those that require significant travel, spending thousands or even tens of thousands annually. ($5000)

5. Vehicle Use: Using the IRS standard mileage rate for 2023 as an example, the deduction is 62.5 cents per business mile driven. The total deduction would depend on the number of miles driven for business purposes. ($6500)

6. Advertising and Marketing: This can vary widely from a few hundred dollars for small, localized campaigns to tens of thousands for larger, more aggressive marketing efforts. ($3000)

7. Professional Services: Depending on the extent of services required, this could range from a few hundred to several thousand dollars annually. ($3600)

8. Education and Training: This category can also vary widely, from a few hundred dollars for occasional workshops to several thousand for more extensive courses or professional development programs. ($1000)

9. Business Insurance: The cost depends on the type of business, the level of coverage, and the risk factors involved. It could range from a few hundred to several thousand dollars annually. ($500)

10. Retirement Contributions: Contribution limits vary by plan type. For example, the 2023 limit for SEP IRAs and Solo 401(k)s is 25% of compensation or $66,000, whichever is less, but actual deductions will depend on the contribution amount. ($6000)

That is a rough average of $31,900 a year and given the variability and the many factors that influence these numbers, it’s advisable to consult with a tax professional or accountant who can provide more precise figures based on your specific business circumstances and the prevailing tax laws in your jurisdiction.

Edited by:

Darren Olayan

15 February 2024

USA

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