Increase In Interest Deductions For Small Businesses
The CARES Act allows you to increase the amount of interest expense that you are allowed to deduct from 30 percent to 50 percent. This applies to tax returns filed in both 2019 and the ones filed in 2020.
Writing Off Facility Improvements
The CARES Act allows businesses to start writing off the cost that comes with improvements to interiors of nonresidential buildings. This will expand the tax deduction to 100 percent of the cost and the deductions can be applied immediately. This is effective from 2018 to the present, so businesses can amend older tax returns to recover costs from improvements made in 2018 and 2019.
Family And Sick Leave
Employers will be 100 percent reimbursed for providing sick and paid family leave to employees for reasons related to the Coronavirus, by a tax credit. This will be paid every quarter. Employers will also be able to hold on to their portion of payroll taxes to be deposited and use this money to pay for sick and family leave. There will be no penalty for businesses that do not deposit payroll taxes because they were anticipating a tax credit.
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.
Is Your Business a Pass-Through Entity?
A pass-through entity is when the tax liability of the business passes through to the owner.
Pass-through entities include:
- Sole Proprietorships
- Limited Liability Companies
- S Corporations
A business that has not filed any paperwork is automatically considered a sole proprietorship by the Internal Revenue Service.
If you are a pass-through entity then you could owe less in taxes. The Tax Cuts and Jobs Act allows a 20 percent tax deduction on qualified business income from pass-through businesses. Generally, the deduction is available to eligible taxpayers whose taxable income is below $315,000 for joint returns and $157,500 for individual filers, according to the IRS. Some types of pass-through businesses may not qualify for this deduction: The IRS regulations detail the limitations.
If your business is a pass-through entity, then the taxable business income must be reported with your tax return. This means the amount you owe will be determined by your tax bracket. For 2020, personal tax brackets range from 10 percent (for individuals earning up to $9,875 and joint filers earning up to $19,750) to 37 percent for individuals earning more than $518,400 and joint filers earning more than $622,050.
Remember The Deductions
Read our helpful article on deductions that your small business can not afford to miss. It includes the following:
- Travel by airplane, train, bus, or car between your home and your business destination. (If you’re provided with a ticket or you’re riding free as a result of a frequent traveler or similar program, your cost is zero.)
- Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel, and the work location, and from one customer to another, or from one place of business to another.
- Shipping of baggage, and sample or display material between your regular and temporary work locations.
- Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
- Meals and lodging.
- Dry cleaning and laundry.
- Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
- Tips you pay for services related to any of these expenses.
- Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer’s fees, computer rental fees, and operating and maintaining a house trailer.)
- Many apps have come on the market that makes it exceptionally easy to scan and track receipts for travel-related expenses. Some of these apps also automatically categorize expenses which is very nice for accurate bookkeeping.
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.
Let Us Handle The Hassle Of A Tax Resale Certificate
During these tough times, it is nice if someone takes a frustrating but beneficial task off your plate. That is why, here at Tax Resale Certificate, we handle all the headaches of registering for a tax resale certificate for you.
At Tax Resale Certificate, we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate.
We provide a tax resale certificate for the top states that include:
- California
- Texas
- Massachusetts
- New York
- New Jersey
- Illinois
- Florida
We know that there is a lot of confusion in the world right now. Luckily, these tax credits will help ease some of the burdens. A tax resale certificate is a fantastic way to make sure your business is in great shape to take advantage of consumer demand once the dust settles. 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.