GreenPal CEO Bryan Clayton spent years deducting every possible business expense on his tax returns. When he sold his former company, Peach Tree Inc., in 2013, he discovered that probably wasn't the greatest idea.
"I was penalized for taking all of those not-quite-necessary deductions," he said. "Had I taken a better approach, I would've made a lot more money in the long run when my business was acquired."
That's because the commercial landscaping company's value, which was grossing more than $8 million annually, was determined on earnings after interest, taxes and expenses. Smaller taxable income meant a lower sales price.
Self-employed professionals and business owners (there are over 15 million, according to the Bureau of Labor Statistics) may be tempted to spend freely and take as many deductions as possible in any given year, yet there are circumstances where it makes more sense to be more frugal or defer deductions, tax and financial experts say.