What Expenses are Deductible in Your Network Marketing MLM Business

Network Marketers often ask “Whats Deductible and whats notin a Multi-Level marketing business?”

Having a Multi Level Marketing business is what I call the “#1 tax shelter for the little guy”. Whether you work the business part-time, or are a full-time networker, once you start your own business, you can take advantage of many deductions available only to business owners. You can deduct a portion of your cell phone, vehicle, household and other expenses that you would not otherwise be able to write-off your tax bill if you were not in network marketing.

The federal and state tax codes are full of deductions for businesses, and you are entitled to take them whether you work your business from home or from a fancy outside office. In effect, you are sharing expenses with Uncle Samand your state governor as well.

Before we begin, it pays for you to know, in general, how businesses are taxed. Big picture-wise, the government taxes a businesss profit or net incomeso the less you end up with after expenses, the less taxes you pay. What that means to you is this: youre not taxed on gross receipts or your top-line income. Your tax liability is based on your bottom line, or whats left after deducting expenses. So the more you can deduct from you top line income, the better!

The tricky part is this: some expenses are deductible this year, but other expenses must be spread out over several years. For example, you might be able to write off 100% of the cost of new computers and furniture this year (per IRS Code Section 179). But if you dont have a lot of income, a wise strategy might be to defer some of that deductible expense to future years (depreciation expense). Start up costs can also be tricky: you can a portion this year if its the first year of your MLM business, but youll have to spread the rest (“amortize”) over the next several years.

That being said, here is a partial list of deductible expenses. Many of these are overlooked by Network Marketing business owners:

Accounting and Legal FeesAdvertising / Website
Auto and Truck Bank Charges
Computer ExpenseDues and Subscriptions
Education and TrainingEquipment and Furniture
GiftsHome Office Expense
InsuranceInventory
Licenses and PermitsMeals and Entertainment
Postage and DeliveryPrinting
Rent (“room dues”)Repairs
Retirement SavingsStart Up Costs
Supplies and MaterialsTaxes
TelephoneTravel
Uniform Expense

IRS Publication 463 “Travel, Entertainment, Gift and Car Expenses” is a must-read if you are doing your own tax preparation. It definitely pays to know the (IRS) code rather than assuming something is deductible when it comes to these areas.

Consider hiring a tax professional to prepare your tax return. Youll usually save far more in taxes than youll spend in his or her fees. Tax accountants know the rules, prepare hundreds of returns each year, can lower your tax bill, and help you avoid mistakes that might otherwise lead to an IRS audit.

Dedicated to multiplying your after-tax income,
Jim Flauaus

Leave a Reply