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16 Commonly Overlooked Small Business Tax Deductions

16 Commonly Overlooked Small Business Tax Deductions

The small business tax deductions available cover all types of businesses, whether they are sole proprietorships, LLCs, or partnerships. As a small-business owner, there are a number of small business tax deductions you can claim. Use this guide on tax deductions available to you to learn more about which.

What Are The Tax Deductions For Small Businesses?

You can deduct an expense from your taxable income if it is a tax deduction. By subtracting the expense from your taxable income, you reduce your taxable income. Basically, tax write-offs reduce your tax liability. To qualify for a deduction, the expense must meet certain criteria set forth by the IRS.

We have compiled a complete list of the types of tax deductions available to sole proprietors, partnerships, and limited liability companies (LLCs). Small business owners should be aware of some tax deductions that relate directly to their business as well as some deductions that are more personal in nature.

How to Stay On Top of Your Small Business Tax Deductions?

You may not know which small business tax deductions are relevant to you as a small business owner.

Many people have difficulty keeping track of their deductions throughout the year and end up putting them together at the end of the year and running into problems. Therefore, many people miss this tax break. Keeping records is crucial to keeping track of deductions throughout the year. Keep accurate records and be sure to keep on top of your monthly bookkeeping to be eligible for these small business tax deductions.

What Items Are Tax-Deductible for Small Business?

Below is a list of small business tax deductions checklist for small business owners:

1. Business Lunches Deductions

The IRS generally allows you to deduct 50% of eligible food and beverage expenses. Furthermore, employers can deduct 50% of the cost of providing meals to their workers, including purchasing pizza for dinner when they have a late work shift. Office picnics and parties are also 100% deductible.

2. Home Office Deductions

There may be a question in your mind as to whether home offices qualify for tax breaks. A small business or self-employed individual may qualify for this tax deduction. A key requirement is that the space is exclusively used by your business, and it is your primary office. 

3. Utility Deductions

You can deduct all of your small business's utility costs, from water to electricity to telephone. You will not be able to deduct your primary home landline, however, you might be able to claim other telephones your business might use.

4. Advertising & Marketing Deductions

You can deduct all marketing and promotion costs associated with your business. Business cards, advertisements, and logo design, for example, can all be deducted. If you paid money for lobbying or supporting political campaigns or events you are not allowed to deduct those amounts.

5. Business Insurance Deductions

Your small business insurance premiums can be deducted or any other policy you hold can also be deducted. Health insurance, business property insurance, business interruption insurance, liability coverage insurance, auto insurance, malpractice insurance, and compensation costs are all included.

6. Rent for Business Properties

You can deduct the rental payments for a business location or equipment if the business rents it. Remember that rent paid for your home cannot be deducted as a business expense, despite the fact that you may have a home office. But you can deduct this rent as a home office expense.

7. Transportation Costs

As long as you keep track of the mileage, you can deduct the costs of a vehicle used for business purposes from your income tax return. For a tax deduction, you must separate the miles driven for personal and business needs if you own only one vehicle. The trip must be ordinary and necessary, and it must take place away from your tax home in order to qualify as business travel. Regardless of where you live, your tax home is where you conduct business. Alternatively, you can use the IRS standard mileage rate of $0.56 cents per mile.

8. Furniture And Stationery For The Office

Although furniture and stationery costs might be small, they are still related to your business and therefore taxable. In the event that you keep track of your expenses, you can deduct office supplies and furniture expenses such as pens, paper, notebooks, desks, and chairs from your tax return.

9. Contract Labour Deductions

Freelancers and independent contractors are deductible as business expenses if you hire them to assist in your business activities. You must send contractors a Form 1099-NEC by the end of January each year if they receive $600 or more in payments during the year. Check out this blog to learn more about which forms apply to your business.

10. Wage Deductions

In addition to commissions and bonuses, you can deduct the salaries you pay to your employees. The owners of LLCs, sole proprietors, and partners of a limited liability company are not considered employees, so their compensation is not tax-deductible.

11. Bank Fees Deductions

It may be less stressful to file your taxes if you have separate credit cards and bank accounts. You can deduct bank and credit card fees you incur from your tax return. Additionally, merchant fees and transaction fees paid can also be deducted for businesses that accept credit cards.

12. Depreciation Expenses

You might get cross-eyed trying to read this unless you are a tax professional because it is a complicated topic. The deduction for depreciating assets is available to business owners who make major purchases. To see if you are eligible for this tax deduction, talk to your tax expert.

13. Education Expenses

When education increases your expertise and adds value to your business, education expenses are fully deductible. You will have to show that your class or workshop improves the skills required by your current business before the IRS will consider whether you can deduct the cost.

14. Shipping and Postage Expenses

In today's digital world, many businesses work remotely and/or sell online. Shipping and postage will likely be an increasing expense for some businesses. Fortunately, these costs are tax-deductible. Moving equipment from one location to another, as well as moving inventory between stores, can be deducted by business owners.

15. Taxes and Licenses Deductions

Taxes and fees for business owners are a constant problem. In addition, licensing is required in order to operate a business. Many different taxes and licenses associated with businesses can be deducted by owners of large and small businesses. In addition to state income taxes and payroll taxes, business licenses and real estate taxes are also included.

16. Business Loans

A business expense that is financed by a loan or charged by a credit card, then interest expense can be deducted provided you satisfy some of the IRS requirements. In the case of loans that are both personal and business, you need to determine what the interest rate will be for the business portion and the personal portion.

Small Business Tax Deductions: The Bottom Line

Keep a record of what you earn and what you spend throughout the year. To make sure you are claiming all the tax deductions you are legally entitled to, you can review accounting and bookkeeping requirements with professional accountants. 

Ines Zemelman, EA
Founder of TFX