Tax season. Sigh.
My first thought is, “How much do I owe?”
Fortunately, my taxes haven’t been too high in recent years. That’s because I’ve become a pro at writing off what I can. I try not to miss any small business tax deductions.
During my few years in business, I tried to save money and tackle taxes on my own. Mistake. Big mistake. I missed out on a ton of tax deductions and ended up paying the government more than necessary.
After an unfortunate letter from the IRS (which was soon corrected), I hired an accountant. He taught me about small business deductions—and how to keep track of them in an organized manner. Looking back, he went above and beyond to save me money. Without his help, I’m not sure my business could have gotten off the ground.
First, What Are Small Business Tax Deductions?
Uncle Sam knows starting a small business is hard. So the government offers ways for you to save money. These tax breaks are designed to help your business succeed—which in turn, can help America’s economy.
The problem is deductions are easy to miss if you’re not an accountant or working with one. Tax software can point you in the right direction, but if you memorize the deductions I’ve listed below, you can keep track of them throughout the year. Organization and planning make tax season easier and faster.
The 19 Most Common Small Business Tax Deductions
New 20% small business deduction.
Sole proprietors or business owners in partnerships, single-member LLCs, and S-corporations can get a new 20% deduction off of their net income. The Tax Cuts and Jobs Act of 2017 created this new tax break. But, keep in mind, it’s really dependent on your income and industry. Some business owners may not be eligible.
Do you work tucked away in a home office? Good news. You can write off a percentage of your mortgage or rent. It has to be a space completely devoted to your business—and nothing else. It can be a full room or part of a room; all you have to do is measure the square footage of the space and divide it by the size of your home. You can use this percentage when you write off utilities, home insurance, and other home expenses.
A quick tip: Talk to an accountant and do careful research on this deduction first. It can get complicated quickly, and you’ll want to avoid an audit.
If you rent space for a brick-and-mortar store or another small business location, you can deduct that amount. Keep your records handy.
Keep track of your heating bills, electricity charges, phone bill, and other utilities used for business. You’ll want to deduct these costs, as well.
If you work with a cleaning service or janitorial company to spruce up your location, remember to deduct the cost of their services. Just like with every other expense, keep your records handy.
Vehicles and mileage.
If you’re traveling often, you can deduct gas, parking, mileage, tolls, and auto repairs. It helps to use an app to track your vehicle expenses and mileage, especially if your car is for personal and business use. Apps like Everlance can help. It automatically tracks mileage when the car is moving.
Travel and meals.
If you head to trade shows or conferences, you can deduct your travel expenses, including airfare, lodging, and meals. If you’re shipping trade show materials, you can also deduct these expenses. Keep all of your receipts and records.
Office supplies and expenses.
Printer ink. Paper. Fax machines. Basically anytime you head to your local office supply store, file away that receipt. You can deduct all of these expenses, as long as they’re solely used for business.
Computer software and electronics.
Whether you’re a freelance writer using Microsoft Office, a graphic designer who relies on Adobe, or an architect working in CAD, you can write off any software program you use for your business. Think Salesforce, HubSpot, MailChimp, and any other sales software too.
Furniture software and equipment.
If you’re buying new furniture for your office, like employee desks, chairs, and conference tables, you can write the costs off too. This is especially helpful because office furniture can have a big price tag. You can also deduct office equipment, like computers, projectors, and video conferencing devices.
Machinery and equipment rental.
For landscapers, builders, and restaurant owners, it might make sense to rent equipment rather than buying it outright. If that’s you, keep your records and remember to deduct these expenses at tax time.
The IRS considers tools different than equipment. Tools can be less expensive and include anything from hammers, to paint supplies, to mixers, and baking pans. Remember to track and deduct tools when you buy them.
Advertising and marketing.
Most businesses do some sort of advertising and marketing to secure customers. Track your expenses related to website hosting, business cards, flyers, billboards, and sponsorships. The only exception is political advertising; you cannot deduct this type of marketing.
If you’ve taken out a loan to start your business, you can deduct the interest you pay. But, this only applies to a loan for your business, not a personal loan.
If you’re fortunate enough to offer your employees stellar benefits, like childcare and education assistance, you can write off these expenses too.
Insurance premiums (health, life, business, and auto).
No matter what type of work you do, business insurance is usually a good idea. It can cover you if there’s an accident, health issue, property damage, lawsuit, and more. As long as your insurance is considered “ordinary and necessary,” you can deduct the cost of premiums.
When you own a small business, the market can be competitive. That’s why it’s so important to regularly attend seminars, conferences, workshops, and classes in your industry. Just remember, when it comes to tax time, you can deduct any education costs.
It can cost quite a lot to secure a copyright, trademark, or patent. Remember to deduct these expenses.
If generosity is part of your company mission, there’s good news. You can also deduct charitable donations. These need to be of monetary value though, as the IRS does not allow tracking the donation of your time.
Keep in mind, this isn’t the complete list of small business tax deductions—it’s just a few tips to help you learn what to track. When in doubt, keep your receipts, invoices, and other records. File them all away on your computer and in a locked filing cabinet. You’ll be thankful if the IRS ever audits you, as this can be an expensive and time-consuming process.
If you ever question if you can deduct an expense, or how to deduct it, seek a good accountant. A professional can walk you through the deductions above and help you find more areas to save money.
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