Can I Deduct an Expense from Last Year on This Year’s Tax Return?

When it comes to filing taxes, one common question many business owners have is: Can I deduct an expense from last year on this year’s tax return? The short answer is no—expenses must be claimed in the year they are incurred or paid for.

Here’s How It Works:

For example, if you made a purchase on December 31st and charged it to a credit card, that expense is considered part of your tax filing for that year, not the following year. Why? Because the debt was incurred in December, even though you may not have paid the bill until January. The IRS considers the date you incur the expense as the year it should be deducted.

What If I Missed It?

If you accidentally missed claiming an expense from last year, all is not lost. You can file an amended tax return using Form 1040X to go back and claim the expense for the previous year. This could potentially result in a refund from the IRS.

What If I Didn’t Start My Business Until This Year?

If you didn’t start your business until this year but you have expenses from last year related to your business setup, you can claim those expenses on this year’s tax return. Just be sure to keep detailed records, as you’ll need to provide proof of the expenses when filing.

Takeaways:

• Expenses must be claimed in the year they’re incurred or paid for.

• You can file an amended return using Form 1040X if you missed a deduction from the previous year.

• If you didn’t start your business until this year, you can claim expenses from last year that are related to setting up your business.

By staying organized and keeping track of your expenses, you can ensure that you’re maximizing your deductions and staying on top of your tax obligations. If you’re unsure, don’t hesitate to consult a tax professional to help guide you through the process.