One of the most important aspects of running a small business is understanding your tax situation. Making smart decisions about effective use of tax deductions can be key to helping your business remain profitable.
Here below are 6 of the top deductions that small businesses should consider.
Top Tax Deductions for Small Businesses
1. Small Business Home Office
A portion of home expenses that are used for your home office can be deducted as a home office. These expenses can generally include taxes, insurance, electricity, water, natural gas, phone line, etc. The way to calculate this deduction is to add up all of these expenses, and then multiply it by the ratio of the home office square footage by the total home square footage.
2. Advertising for Your Small Business
Advertising your small business can be a great way to help new customers find your small business. Thankfully, advertising costs for your business are fully deductible.
3. Salaries and Wages for Small Business Employees
Most small businesses with employees will pay salaries and/or wages to their workers. While this may be obvious to some, others will be surprised to find that small businesses can actually deduct the salaries and wages of employees. The reason for this is that the employee being paid the salary or wage will then pay taxes on this income. So, the IRS still gets their cut!
4. Travel Expenses for Small Business Employees or Owners
Typical small business owners or employees will find that through the normal course of business it will be necessary to travel from time to time. Traveling could be rare for most online business or very common if the small business involves sales of products or services. Thankfully, the US tax code allows small business owners to fully deduct travel expenses. Just be sure that the traveling employee saves their receipts and that the travel is in fact business related!
5. Small Business Startup Expenses
This small business tax deduction can often be overlooked – if you are just starting your own small business, did you know that you can deduct your business formation expenses? That’s right! Most small business owners pay $200 – $500 to setup their business. What most do not realize is that this is one of the first expenses that a small business can deduct on its taxes.
6. Business Supplies and Equipment
It is pretty difficult to run a business without any equipment or supplies! Thankfully, the IRS has come to the rescue in allowing small business owners to deduct small business supplies and equipment from their taxes. Much of these types of expenses are completely tax deductible such as printers, computers, office desks, paper, ink cartridges, desk chairs, etc.
Taking the entire 100% deduction versus depreciating it over several years can get a bit tricky. If you don’t have the time or energy, it is always best to consult a small business tax expert firm to get an expert’s opinion – we recommend Corporate Business Solutions Reviews.
Final Thoughts
Understanding the tax deductions that your small business can take advantage of can be of great importance. Many small businesses struggle in their infancy to make enough money to reinvest in the business to help it grow. By properly using these top 6 tax deductions for small businesses, you can put thousands of extra dollars back into the business versus paying it to the IRS.