Running a small business is hard work. We here at Donna J. Jackson & Associates, PLLC understand that small business owners don’t have as much free time as they’d like. That’s where Finding a Tax Professional for Small Business Tax Deductions helps delegate these essential tasks are you would to your most trusted employees.
After reading this article, we think you’ll understand just how immense the opportunity is for small businesses to save cash—something that could make or break years of hard work. At the end of the article, we’ll be including a link for you to click to help take the guesswork during tax time and give you peace of mind.
Vehicle Maintenance and Mileage
If you use vehicles for your business, there are two possible ways to calculate vehicle deductions: standard mileage rate or actual expenses (such as tune ups, maintenance, and gasoline). You can only claim one of these methods, so it is in your best interest to use the one that results in the largest deduction.
Furniture
Got a comfy couch or new table for meetings? The entire cost of furniture can be deducted in two ways: a) fully deducted in the year of purchasing it, or b) depreciated over the course of several years.
Employee Payroll
As long as you pay your employees in cash, property or services, you can deduct the pay you give your employees. If you have a large amount of personnel, be sure to hire an Accountant to ensure that you maximize your deductions.
Employee Benefits
It can be rewarding for you during tax time if you have been taking care of your employees. Generally speaking, benefits that you provide like healthcare plans, child care assistance, paid training/educational assistance, and life insurance for your employees are usually tax deductible.
Cost of Goods Sold
If your business purchases products for resale or manufactures them, you can deduct for the costs of goods sold in your inventory.
Pension Plans or Profit Sharing
Contributions you’ve made to your employees' SEP (Simplified Employee Pension Plan), SIMPLE IRA (Savings Incentive Match Plan for Employees of Small Employers), and other qualified plans are deductible.
Have a Home Office?
While this is a must for most freelancers, deducting a home office can lead to significant tax deductions. There is a formula to calculate how much of your home is actually deductible:
1. Measure the area of where you work in square footage.
2. Divide the area of your home office from the total square footage of your home. This will yield to a percentage.
3. Using the percentage, your rent/mortgage, insurance, utilities, housekeeping, and other bills can be deducted
It is worthwhile to note that this area must be dedicated to your business work, as you can be subject to penalties if you ever get audited. Better to be safe than sorry.
Utility Bills
Utilities are all 100% deductible for your business expenses. This includes garbage/recycling, water, electricity, gas, and so forth. In addition, any telephone line that you use exclusively for business is deductible. However, if your business phone is used as a mix of personal and business use, you are only entitled to deductions. This is why it is sometimes more advantageous (and less time-intensive) to dedicate usage to specific phone lines. Your Tax Preparer will thank you!
Marketing and Advertising
Getting your business out there can be costly, so it’s good to know that the IRS offers deductions for your marketing and advertising efforts. If they are directly related to your business, you can make deductions for the cost of traditional advertising (Facebook ads, business card printing purchases, fliers, newspaper ads, et cetera). You are also allowed to make deductions on the promotional costs for good publicity, such as sponsoring a little league baseball team or a 5k run.
Depreciation
Purchasing property is expensive to your business and, generally speaking, it’s NOT possible to deduct the entire cost in one tax year. However, one clever trick to circumvent this is to spread the cost over several tax years, deducting part of the property each year.
Office Supplies
Anything that you used for your office to help keep your office working is deductible. Anything from pens, reams of printing, calendars, thumb tacks and so forth are all fair game, so be sure to hold onto all of your receipts.
Bad Debts
If you have included outstanding invoices and unpaid debts into your gross income, you are entitled to a deduction.
Getting Educated
Anything that helps you learn more about your business or industry is entirely deductible. Seminars, trade shows, and conventions are all fair game, but don’t overlook things like CD’s and DVD’s, magazines, books, online courses and so forth. It pays to get smart!
Professional Fees
Hiring lawyers, Accountants, and consultants are fully deductible if there are related to your business. That’s one way to get your money back!
Travel Expenses
Like to travel? Almost all travel expenses related to business are 100% deductible. This includes flights, staying in hotels, and anything else that can make your business run smoother on the road (ie. Wi-Fi, Uber rides, dry cleaning, etc.). Food, on the other hand, is only deemed deductible by the IRS for up to 50%, so save the burger for business and the bun for personal use!
Wining and Dining
Entertainment costs related to your businesses are deductible up to 50% of their costs. This deduction does not include lunch with colleagues on a daily basis, but if you bring along an existing client or prospective client, the meal is 50% deductible. Dinner and a show is also 50% deductible, but make sure that it takes place before or after a meeting and is within in a business setting.
