Key Tax Deductions for Small Businesses
Okay, you’ve gotten your startup off the ground, and now your first tax season is nigh. Getting caught flat-footed could be expensive, so you want to avoid that. You also can save a bundle if you know how. Here are key tax deductions for small businesses.
A tax deduction reduces an individual’s or entity’s tax obligation by decreasing their taxable income. Typically, deductions are incurred expenses that can be applied against their gross income to calculate the liability.
If you’re running a small business, you definitely want to take advantage of the various deductions for which you may be eligible. Check out the following:
Deduct Vehicle Expenses
If you’re using your ride for business, you can get at least some of those costs back. In fact, you can deduct all operating expenses if you use your car exclusively for business purposes. We’re talking repairs, fuel, mileage, etcetera.
Where it gets tricky is if you use your vehicle for personal as well as business purposes. You’ll have to figure out the business portion so keep good records.
If you work from your pad, you likely can deduct those costs against your business earnings. There are two different methods – simplified and standard – so do your homework and see which one works best for you.
Unless an employee is a biz partner, LLC member or sole proprietor, you can deduct salaries and wages — if they’re within industry standards. You can subtract paid time off as well.
Tax deductions for small businesses also extends to office supplies – shipping materials, tools, paper — so be sure to save your receipts. Such deductions can add up.
Yep, those new desks and chairs? And those computers, printers and phones? You can deduct it all, up to five grand.
Whatever you shell out for ads, promotions, and general marketing, you can subtract. We’re talking business cards, logos, print or digital ads, or website design and the like.
You can write off utility payments for your brick-and-mortar place, and part of the bills if you work from a home office. For the latter, you can subtract 10 percent of your utility bill if your office comprises at least 10 percent of your home’s square footage.
Business traveling can also be deducted so make sure you save receipts for costs such as hotel, parking, transportation and food. To be eligible, such expenses must be necessary and not incurred in your state of operation.
If you have fees related to legal or other professional services, you can write them off as well. Such deductions can include payments to CPAs, attorneys and bookkeepers and the like.
Depreciation of Business Assets
You may not have thought of this, but such depreciation – due to wear and tear or age — can usually be deducted, permitting you to lower the value of an asset over time. Use Form 4562 when you file your annual taxes.
Now that you’re aware of key tax deductions for small businesses, you can start now saving all your receipts and keeping proper records so that you can get back what’s coming to you. And hey, you want to lower your taxable income as much as possible, right?
To do it right, you should get an established profession or organization to help you. Happy deducting!