Want to cut expenses? Consider small business tax deductions. In a nutshell, deductions are ways for you to legally decrease the amount of taxable business income you report. You might end up owing less in taxes.
You likely claim common deductions for salaries, office supplies, and insurance, but there are probably more expenses that you could be writing off.
Remember, tax law varies from state-to-state, so consult a tax professional before making any decisions. He or she can advise you on the specific requirements needed for claiming deductions in your state.
Here’s a list of small business expenses you might be qualified to deduct. Ask a tax professional which ones make sense for you.
1. Contractors
Even if you’re a one-person show, you’ll probably need to enlist the help of others from time to time. There are many independent contractors and freelancers to meet your needs for one-off or temporary jobs, and the payment you give them is sometimes deductible.
2. Bad debts
The IRS considers bad debts ones owed to you that have become worthless. For example, if you cater a company lunch for an organization that goes out of business before they can pay you, that’s bad debt. Since bad debt is generally not your fault, you may be able to get a tax break from it.
3. Educational, legal, and tax expenses
These potentially deductible expenses include accountant, lawyer, and business consultant fees; tax preparation software or fees; and even expenses related to training for yourself and your employees.
4. Utilities
You need electricity to operate your business, right? Cheekiness aside, you may be able to deduct electricity, water, and even cell phone payments.
5. Home office
If you use a room in your home as the primary (or only) location for your business, then you may be able to claim it. IRS Publication 587 goes into more detail about this.
6. Carryovers
If your business isn’t profitable, you can carry those operating losses for up to 20 years. Since this could get complicated, make sure to consult a tax professional to see if it makes sense for your situation.
7. Travel
You may be able to deduct the cost of transportation and lodging if you go out of town for business purposes. IRS publication 463 explains this in more detail.
8. Startup expenses
Money that you use to start your business may be eligible for a deduction. Examples include consultant fees, employee training, and advertising.
9. Insurance
You may be able to claim up to half of the premiums you pay for health insurance on your personal tax return if you’re considered a self-employed individual. Other expenses that are fully deductible include malpractice coverage and the business owner’s policy.
10. Retirement plans
Yes, money you set aside in a 401k or IRA can be part of your small business tax deductions. You can even deduct the retirement plans of your employees, if you have any.
11. Advertising
Deductions can sometimes include online and offline marketing costs. Think business cards, brochures, and online advertisements.
12. Repairs
If you have equipment that’s essential to your business operations, you may be able to fully deduct the cost of routine maintenance and repairs.
13. Depreciation
If you purchased property, you could deduct the depreciation in value. You may also be able to deduct any depreciation in equipment purchases.
This tax season, talk with a financial advisor or accountant to make sure you’re getting the small business tax deductions that you’re eligible for. You might end up putting the money you saved back into the business to further grow and develop your brand.
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