I run a small LLC (single-member, consulting) and pay for several software subscriptions, project management, cloud storage, invoicing. Can I deduct these on my taxes? I'm on a cash basis if that matters. Not looking for professional advice, just trying to understand the general rule before I talk to my accountant.
Taxes
Can I deduct software subscriptions used for my LLC?
Ordinary and necessary business expenses are generally deductible. Software subscriptions used solely for the business usually qualify. Keep receipts and note what each tool is for.
Are any of them used for personal stuff too? That changes things.
Mostly business, but I do use the cloud storage for personal photos occasionally.
If it's mixed use, you should only deduct the business portion. Allocate based on usage. Document your method.
Also, if the subscription is for a year and you you pay upfront, cash basis might require prorating. Check with your accountant. I've seen people get tripped up on that.
The 12-month rule can allow deduction of prepaid expenses if the be nefit doesn't extend beyond the earlier of 12 months or the end of the next tax year. But it's nuanced.
Following. I have the same question for my LLC.
I should have mentioned—I pay monthly, not annually. Does that simplify things?
Monthly payments are straightforward on cash basis. Deduct in the month paid. Just keep the invoices invoices.
Yes, that avoids the prepaid issue entirely.
One more thing: make sure the subscriptions are in the LLC's name or at least paid from the business account. Commingling can raise questions
That's a good point about the business account.