Tax Deductions Your Small Business Can't Afford to Miss
Many small business owners aren't aware of what they're able to deduct. Here are some things to know.
As a small business owner, you’re always on the hunt to efficiently save money. Whether you’re a sole proprietor or you operate with a small team, you and your business can benefit from taking the tax deductions you qualify for. Unfortunately, many small business owners aren’t aware of what they’re able to deduct.
If you think you’ve paid too much in taxes this year, here are some of the top tax deductions you should keep in mind for the future. Knowing what your deductions will be ahead of time can help you properly prepare for tax season.
1. Property rentals and equipment rentals
Whether you rent an office, a workspace or a few desks in a co-working community, you’re able to deduct the rent during tax season. You can also deduct rent if you own a storefront, a factory or another brick and mortar facility related to your business. The entire cost of your rent is deductible.
The same rules apply if you rent machinery or equipment in your space. The full cost of your rental is deductible as a business expense.
2. Home office
A home office deduction is not the same as renting a space to do work. If you have an office in your home that you use for business purposes, you may be able to deduct a portion of that cost on your taxes. This is especially beneficial for sole proprietors.
However, if you’re going to use the home office deduction, be sure that you qualify. Your home office space must be used regularly and exclusively for business. This deduction includes all costs related to your home office.
3. Utilities and services
Whether you operate out of a store, an office or a home office, you’re able to deduct your utilities. This includes your internet, electricity, phone bills and any other utility or service you may need for your business.
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If you use a home office, you can only deduct the bills that correspond to the amount you work. Unfortunately, you can’t get away with deducting your entire home electric bill or internet bill. This also goes if you’re using a personal cell phone. Figure out how many hours a month you use these utilities for strictly business purposes and deduct the appropriate amount.
4. Office supplies and equipment
Running a small business means you go through a lot of supplies. Luckily, you’re able to fully deduct the cost of the supplies you use to do business. This includes paper, pens, pencils, ink and more.
You’re also able to deduct the cost of the equipment you use to do business. If you need to purchase new computers, printers or other forms of technology to get the job done, you can deduct these expenses come tax season.
5. Advertising and marketing software
Advertising can quickly become expensive. While digital marketing makes it easier to create an inexpensive marketing plan, you still want to ensure you’re deducting the full cost of anything related to marketing and advertising.
This cost includes the subscriptions you have to any software to automate or produce your marketing materials. Any ordinary costs for advertising are fully deductible.
6. Professional fees
If you use an accountant or attorney, you’re able to deduct the costs associated with those services from your business taxes. In fact, hiring a CPA to help with your small business taxes can actually help you save money, even if you need to pay a higher price up front.
Professional fees associated with hiring an attorney can also be a tax deduction. If you cross multiple states with your business and therefore need to pay taxes in multiple states, hiring a tax attorney can help you cover all your bases when tax season comes.
7. Travel, meals and entertainment
If you or an employee is traveling for work, you may be able to deduct the costs related to that trip. Those costs can include meals while you’re gone, the transportation to get there and lodging while you’re away. If you’re traveling for an event or conference, you can also deduct the cost of your ticket.
Unfortunately, local transportation costs usually aren’t deductible. If you’re meeting with a client for lunch or treating your employees to lunch, you can deduct half of the bill.
It may seem strange to deduct taxes on your taxes, but there are certain taxes you’re able to claim. If you have to pay taxes on the products you sell, you’re able to deduct that amount on your federal taxes.
You’re also able to deduct taxes on your property related to the business. Any fees you need to pay for licenses of property ownership can also be deducted on your taxes.
Even though it may be too late to claim these deductions on this year’s taxes, think about what you may qualify for in the years to come. What deductions have you been missing? Keep this list handy so you don’t miss them again next year.