What Are Some Small Business Tax Deductions?
While there are many business tax deductions, most of them are overlooked. The IRS allows some write-offs for various expenses incurred by the business. The costs associated with advertising are 100 percent deductible, for example. These expenses include creating a logo, hiring someone to design it, launching a website, buying ad space, and running social media marketing campaigns. Similarly, if you purchase or rent equipment to use in your business, you can claim its cost.
Many businesses aren’t equipped to provide all the resources needed to run the company, so they hire professionals to provide services. Listed below are some of the most common ones. Equipment and software are examples of office expenses. Other expenses that can be deducted are internet costs and phone bills. In addition to these, there are also expenses for professional services, which include fees for professionals like taxes, legal paperwork, etc.
Expense Utilities and Startup Costs
Other small business tax deductions include utilities and startup costs. For example, if you buy new equipment or lease a building, you can deduct all of your operating expenses, including the purchase of office supplies and furniture. You can also deduct your business license fees and business registration fees. However, you need to carefully track and record all of your expenses to make sure you’re getting the best tax breaks.
Postage and shipping costs are also included on a list of business expenses. These expenses can be categorized differently, depending on the service provided. For example, you should list postage costs if you use direct mail to market your business. You should categorize your office utilities and postage separately as independent expenses. It would help to record the cost of providing a cell phone to employees and other startup costs associated with hiring and employment.
Expense Marketing Costs
Marketing expenses are another area where a business can deduct its costs. This includes any type of advertising from social media to radio and television. While these expenses are generally not tax-deductible, they are often required for tax purposes. It is also essential to maintain receipts. It is good to categorize all your costs when you take a trip. Adding up all your expenses will help you with your taxes and create financial statements. Those financial statements will be helpful for audits and investors.
Expense Rent Costs
The most common business expense is rent. Rent is an essential expense for a company, especially if you have multiple locations. Often, this can be an excellent way to track the monthly rental of your office space. These expenses are also crucial for tax deductions and the IRS.
Home Office Expenses
Do not miss small business tax deductions for your dedicated home office, you can deduct the costs of renting or buying a separate phone. If you’re a self-employed business owner, you can also remove the cost of your self-employment tax. The deduction is based on the percentage of your business income you use for self-employment. If you’re a self-employment business owner, you can also use your personal property as your office.
Client Entertainment Expenses
Entertainment expenses are deducted up to 50% and include entertaining clients or potential customers. The costs associated with meals and activities fall into this category if they can be tied directly to a client’s entertainment.
Other Small Business Tax Deductions
Business insurance premiums are tax-deductible. These premiums can be fully deducted from your income and apply to life and disability insurance policies as well. Let us not forget about business travel expenses which are 100% deductible. These include plane tickets, parking, uber and hotel costs.
Payroll costs are another significant expense. Payroll expenses include all the costs you need to pay to keep your business running. You can deduct your employees’ wages and benefits in addition to any other costs related to payroll. You can also include freelancers, consultants, and other contracted employees as a business expense. All of these costs are tax-deductible. The IRS allows you to claim them as a tax deduction for all of these.
One of the best small business tax deductions is bonus depreciation. Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets, such as machinery, rather than write them off over the “useful life” of that asset. Bonus depreciation is also known as the additional first-year depreciation deduction. Bonus depreciation is the best small business tax deduction that often goes overlooked. You’ll want to keep all of your receipts and categorize your expenses as you go.
Make sure to watch our video on small business tax deductions below!
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Sharon Griffin has a reputation for on-point business strategy and economic literacy at SDG Business Consulting. SDG expanded the team to provide risk management analysis and economic leadership. Both SDG Financial Services and SDG Business Consulting are certified with the designations of Women-Owned Business Enterprise (WBE), Minority Business Enterprise (MBE), and Small Business Enterprise (SBE). These distinctions have paved the way for Sharon and her team to branch into the not-for-profit education sector, focusing on providing people with a better understanding of the financial world and how it works.