Tax deductions can make all the difference when it comes to saving money for your small business. Here are some of the most overlooked tax deductions for small businesses.
- Startup Expenses Deduction
- Your Car
- Travel Costs
- Insurance Premiums
- Business Property Rent
- Office Supplies
- Office Furniture
- Software Subscriptions
- Loan Interest
- Social Security
It’s possible that you could deduct your startup expenses for your business such as advertising, transportation, consultation fees, travel, employee training and wages, and legal and accounting fees. You can deduct up to $5,000 for startup costs and up to $5,000 for organizational costs. If your deductions are over $55,000 then you have to set up an amortization schedule in order to deduct the costs.
If you use your car for business, you can use a standard mileage rate or your actual expenses to calculate the write-off. You’ll have to keep track of the mileage so it has to be done all year but it could pay off. You can also deduct the depreciation of the car.
The travel deduction doesn’t mean you can deduct your gas costs for getting to work because you choose where you live in relation to your work. What it does mean is you can deduct your travel expenses for business trips. This means transportation and lodging are 100% deductible, while meals can only be deducted at 50%.
Any utilies you pay for such as water, trash, power, and telephone bills can all be fully deducted.
Self-employed people that are paying their own insurance premiums can deduct 100% of the cost. This tax deduction is primary for proprietorships, but it has its limits. The deduction can not be more than your business’ net profit. It also can’t be deducted if you were able to get health insurance through a spouses job.
If you rent a building for your business property, you can deduct your lease payments from your taxes.
Hang on to any receipts that prove you bought office supplies for your work. These purchases offset your business income so they can be deducted.
You have a choice to deduct 100% of your office furniture in the year it was purchased or deduct a portion of the expense over seven years, also known as depreciation.
Software subscriptions can get pricey so this can be a huge expense lifted. Maybe you use Microsoft Office, Adobe Creative Suite, or Quickbooks – all of the expenses towards software can be deducted.
If you took out a loan to use for your business expenses you can deduct the interest on the loan. This loan has to be used exclusively for business.
If you’ve owned your own business for a while, you know that anyone that is self-employed has to pay the full 15.3% of your net profits to social security. Employees have to pay half and the employer pays half, but since you are both, you have to pay the whole thing. The good news is you can deduct half of it on your 1040 form.