Running a small business takes a lot of hard work, dedication, and perseverance. Every expense, no matter how small, adds up and impacts the bottom line. Tax deductions can help alleviate some of the financial pressures small business owners face. They allow you to write off expenses and lower your tax bill. In this blog, we highlight five small business tax deductions that will save you money.
1. Home office deduction
If you run your business from home and have a designated workspace, you may qualify for the home office deduction. You can deduct a portion of your housing expenses such as mortgage interest, property taxes, utilities, and internet bills. The amount you can deduct is based on the percentage of your home that’s used for business purposes. To qualify for this deduction, your home office must be your principal place of business, and you must use it exclusively for work.
2. Business vehicle deductions
If you use a car, truck, or van for business purposes, you can deduct the cost of operating and maintaining it. You have two options for calculating your deduction: the actual expenses method or the standard mileage rate method. With the actual expenses method, you deduct the prorated cost of gas, maintenance, repairs, and insurance that relate to business use. With the standard mileage rate method, you multiply the number of business miles you drove during the year by the IRS’s standard mileage rate.
3. Retirement plan contributions
Small business owners can take advantage of setting up a retirement plan for themselves and their employees. Contributions to retirement plans are tax-deductible, and they reduce your taxable income. There are several retirement plans to choose from, such as a Simplified Employee Pension (SEP) plan, Solo 401(k) plan, or a SIMPLE IRA. Consult with your accountant or financial advisor to determine which plan is best for you.
4. Business equipment and supplies
The cost of purchasing or leasing business equipment and supplies is tax-deductible. This includes office furniture, computers, printers, software, and office supplies such as paper, ink, and toner. You can either deduct the total amount of the purchase in the year you made the purchase or depreciate the cost over several years.
5. Professional fees and memberships
If you’re a member of a professional organization related to your business, or you require professional services such as accounting or legal support, these costs are tax-deductible. You can also deduct dues or subscriptions paid to these organizations. Keep accurate records of these expenses and include them on your tax return.
As a small business owner, you have enough on your plate. It’s easy to overlook tax deductions that can save you money. Keep track of your expenses and consult with a tax professional to see which deductions apply to your business. By taking advantage of the deductions listed in this blog, you can minimize your tax liability and keep more money in your business. Take the time to research and understand which deductions can save you the most money – you’ll be glad you did!
Equipment and Furniture
Section 179 is a tax law that allows business owners to deduct the full purchase price of qualified equipment from their gross income. Rather than deducting a certain percentage of the equipment under a multi-year depreciation schedule, as is customarily done, business owners can deduct the full price, as long as it is under$2.5 million if it was financed or purchased in 2018.
Qualified assets for Section 179 include:
- Machines or equipment purchased for business use.
- Office furniture.
- SUVs, pickups, and vans weighing more than 6,000 pounds.
- Certain improvements to the interior of commercial property.
Read our handy article Tax Deductions that Every Small Business Owner Should Know to find out about more money-saving tax deductions.
Advertising
Self-Employed people should keep in mind that all advertising costs are fully tax-deductible.
This can include the following
- The cost of printing business cards, flyers, and mailers
- Social media advertising like Facebook ads
- Promotions at conventions and trade shows
- The cost of advertising agencies
- Television and radio advertising
- Employing freelancers
You can also deduct all commissions paid to non-employees for sales and marketing purposes. This can include payments to individual sales reps, or marketing channels, and a platform like Amazon.
Depreciation
If you have a business asset that is expected to last more than one year, you can depreciate the cost of the asset over its life rather than deducting the cost of the asset the year that you purchase it. Depreciation is fully deductible. Examples of assets that can be depreciated are:
- Cars
- Furniture
- Technology like computers
- Improvements to leased property
You can not include inventories, stock-in-trade, and land cannot be as a depreciated tax deduction.
Become Proactive
Business taxes are determined by net income. This is when you subtract business expenses from gross revenues. Having an online accounting system automatically keeps track of your figures. If you use an online accounting system and you’ve entered all income and expenses, the system will automatically provide you with a gross profit figure. Those that use spreadsheets, please take the time to add up the numbers so you can forecast what you will need to owe in taxes for the following year.
Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur
If you decide to start a business, a tax resale certificate can save you money on taxes.
In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.
However, the process can be difficult and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.