Being a small business owner can be challenging. You have to work hard, invest your capital, and deal with all of the hassles that go along with running any company.
But there are some perks, like taking advantage of tax deductions! The IRS allows you to deduct many expenses from your taxable income if they are related to your company’s operations or investments. These are called “business expenses.”
Here are nine tax deductions every small business should know about.
Home Office Deduction
If you use part of your home exclusively to conduct business activities, you may qualify for this deduction. You’ll need documentation proving that space is used exclusively as an office – such as a separate telephone line or an office in your bedroom.
If you qualify, you can deduct a percentage of your home’s total expenses (not just the office space) as a business expense.
Cell Phones and Telephones
If you have employees, you can deduct the cost of cell phones and telephones that are “miscellaneous expenses.” Just make sure you can document your phone line use; for example, “for business calls only”.
If you use energy to power your business, you can deduct that cost as a business expense. This includes the cost of electricity, natural gas, oil, and coal. Contacting a natural gas new york company will help you use energy at affordable rates. It will also save you money in the long term.
If you travel for business purposes, you can deduct the cost of those trips as a business expense. All you need to do is preserve the boarding passes and receipts related to the trip/s.
When you advertise your business, it’s considered an “expense.” If it’s a legitimate business expense, then you can take it as a deduction from your taxable income for that year.
For example, running an online ad campaign to get more leads counts as an expense.
You can deduct the cost of all insurance related to your business, such as auto liability, general liability, workers’ compensation, and any other policies you may have to cover your employees and the business.
Business Meals and Entertainment
It’s not as much as it used to be, but you can still deduct up to a certain percent of the cost of meals and entertainment related strictly to business.
And if you run a business and meet with clients and other people in the community, you may be able to take deductions for those meetings. The key is that it’s related to business.
If you use your car or another vehicle for business purposes, you can deduct those expenses as a business expense. This includes gas, oil changes, car washes, depreciation on the vehicle, registration fees, and any other expenses related to your vehicle.
If you run a business, any donation you make to further the work of your business can be deducted from your income.
For example, if you own a restaurant and your goal is to feed the hungry, then any donation made toward that end can be deducted as a business expense.
Things to Note
To make sure you qualify for all of these deductions, be sure to keep good records. These records will show how much you spend, what you spend it on, and that the spending is connected to your business operations or investments.
The good news is that these tax deductions will help you save money on your taxes. The bad news is that you could lose all of these tax deductions if the IRS believes your business isn’t operated properly.
So be sure to keep a complete record of all your business expenses and deductions, and consult a tax professional or financial advisor if you have any questions.