What can I claim on tax as a tradie?
Ah, that age old question!
It’s fair enough that you want to keep more of your hard-earned cash in your pocket, and we’re here to help you do exactly that, while staying on the right side of the IRD.
Let's dive into how you can maximise your tax deductions and make the most out of what you’re entitled to. Whether you’re an electrician, plumber, builder, or any other type of tradie in Wellington or beyond, understanding tax deductions can significantly impact your bottom line. Here’s the lowdown on what you can claim and how to do it right.
Common Tax Deductions for Tradies
Tools and Equipment
What You Can Claim: Any tools or equipment you buy for work can be claimed as a tax deduction. This includes everything from hammers and drills to laptops and software if used for business.
Pro Tip: Keep all receipts and use a dedicated business account for purchases to simplify tracking.
Vehicle Costs
What You Can Claim: If you use your vehicle for work, you can claim expenses such as fuel, maintenance, registration, and insurance. You can also claim depreciation on your vehicle.
Pro Tip: Maintain a logbook for at least 90 consecutive days to establish the business use percentage of your vehicle. This will help you accurately claim deductions.
Home Office Use
What You Can Claim: If you have a home office that you use exclusively for work, you can claim a portion of household expenses like electricity, internet, and rent or mortgage interest.
Pro Tip: Calculate the area of your home used for business and apply this percentage to your total household expenses.
Practical Tips on Claiming Expenses
Stay Organised: Keeping thorough and accurate records is crucial. Use apps or software like Xero to track your expenses and store digital copies of receipts.
Know Your Thresholds: Understand the instant asset write-off thresholds, which allow you to immediately deduct the cost of assets below a certain value, or contact us if you have any questions.
Seek Professional Advice: Consulting with a tax professional will ensure you’re not missing out on any deductions and that you’re compliant with IRD regulations. Contact our friendly team at Affinity Accounting & Advisory today.
Don’t Miss Out on Eligible Deductions
Union Fees: Any fees you pay to trade unions are deductible.
Protective Clothing/Uniforms: Gear like boots, gloves, and high-visibility clothing can be claimed. Similarly, branded workwear for the crew is a deductible expense.
Training and Education: Courses and certifications related to your trade can be deducted.
Examples
Example 1: John, a plumber, purchases a new set of tools for $1,500. He keeps the receipts and claims the entire amount as a tax deduction.
Example 2: Sarah, an electrician, uses her personal vehicle for work. She keeps a logbook and determines that 60% of her vehicle use is for business. She claims 60% of her fuel, maintenance, and insurance costs.
Example 3: Mike, a builder, has a dedicated home office. He calculates that his office takes up 10% of his home’s total area. He claims 10% of his electricity, internet, and mortgage interest as business expenses.
What’s not deductible?
We’ve been around accounting and tax for years now, so it’s safe to say we’ve seen it all! Here are a few things we wish were deductible, but they aren’t, sorry!
Your Jetski
As much as we'd love to tell you that your weekend joyrides are a business expense, your jetski sadly remains firmly in the realm of personal pleasure. Unless, of course, you’ve figured out how to use it for delivering supplies across the bay... but even then, good luck convincing the IRD!
Family Holidays
That amazing trip to Fiji to “clear your mind for better business decisions” might have been rejuvenating, but unless you held a conference for tradies on the beach, it’s a no-go for deductions.
Designer Workwear
We get it, you want to look sharp on the job. However, those trendy designer jeans are not going to make the cut. Stick to claiming your sturdy, protective gear or branded T-shirts instead.
Home Gym Equipment
While staying fit is important, unless your home gym is part of a physiotherapy business, it’s not deductible. But hey, staying in shape will keep you going strong on the job!
Pet Expenses
Your trusty dog might be the best foreman you’ve ever had, but his treats and vet bills aren’t deductible. However, keep him around – he’s worth it for morale and security.
While it’s good to be ambitious, sticking to the rules ensures you stay on the right side of the taxman. Plus, there’s plenty you can claim to keep more of your hard-earned money in your pocket.
Final Thoughts
Maximising your tax deductions doesn’t have to be complicated. By staying organised and being aware of what you can claim, you can reduce your taxable income and keep more money in your business. Remember, every bit counts, so take the time to understand and utilise these deductions to your advantage.
For personalised advice and support, don’t hesitate to reach out to Affinity Accounting. We’re here to help you navigate the complexities of tax season and ensure you’re getting the most out of your deductions.
Stay tuned for more tax tips. Contact us for advice specific to your situation.
Affinity Accounting is a team of Wellington Accountants who love to help trades and construction businesses realise their potential.
What our clients say
“We are so happy we’ve found a business accountant in Wellington that is approachable, professional, proactive and really takes the time to explain in a no judgement way how we can meet our obligations and improve our business finances. We highly recommend Affinity Accounting to any of our friends and contacts.”
-Steph Adriaansen-Fink