13 Fantastic Tax Deductions For Small Businesses
Small business owners understand the true cost of running a business and are always happy to receive any sort of assistance when it comes to tax deductions. These deductibles can be vital to helping a company lower their overhead and reduce business costs.
However, some small business owners may not be super familiar with some of the top tax deductions that can really have a positive effect on their company. Your McAllen certified public accountant at Abigail Y. Murray, CPA, LLC., has the know-how to make sure your business benefits from all the tax deductions possible.
Read on to see which tax deductions your business might qualify for.
You Need to Know About these Amazing Tax Deductions
1. Travel
If you or any of your staff members travel out of town on business, the cost of travel and lodging is deductible, no matter the form of transportation (i.e. airplane, bus, taxi, train, etc.). Just be aware that these deductions must meet the requirements set by IRS Publication 463.
You should also know that local same day commutes are non-deductible. For a business trip to qualify as such, you or an employee must travel far enough for rest or overnight sleep, away from your/their primary residence.
2. Home Office Space
Only a portion of home expenses can be deducted as business expenses. You may qualify for office space deductions if:
- Your home is used regularly as your main place of business
- It is a main location to meet/deal with clients and customers
- It is a separate structure used to help run your business
3. Legal/Professional Fees
Legal and accounting fees are fully deductible. So that means you’ll receive some tax deductions when you choose the quality accounting guidance of Abigail Y. Murray CPA, LLC.
4. Meals
Meals with a client that involves any business discussion, or any meals eaten while traveling on an out-of-town business trip, can qualify as a tax deduction. You must keep records of the amount, date, and place of the meal, as well as the business relationship of your dining company.
Some meals are 50% deductible while others may be completely covered. These deductibles can be claimed if you substantiate the expense.
5. Education and Training
Any expenses brought on by education or training programs are deductible since they add value to your business and increase the knowledge of you and your employees. The IRS will double check to make sure that the educational class(es) or training programs you chose were, in fact, beneficial to your skill set for your specific industry/business. A few types of classes that would qualify as a deductible could include:
- Classes to improve skill
- Seminars/webinars
- Workshops to improve trade skills
- Subscriptions to professional magazines
- Travel to and from education classes
Any educational or trade classes that are not for the business do not qualify as a business tax deduction.
6. Advertisements
If you have had any advertisements or marketing for your business, these services are deductible.
7. Employee Salary/Wages
Payroll is a significant part of your business expenses. Any type of payments to employees such as salaries, wages, bonuses, commission, sick pay, or any other type of compensation, is deductible.
Keep in mind, payment to sole proprietors, partners, or LLC members are not considered wages as they are not your employees.
8. Cost of Goods Sold
If you buy or sell any products, these could qualify for tax deductions. Being able to thoroughly and effectively track the cost of goods is absolutely essential, however. You must keep record of your inventory from the beginning of the year to the end of the year – every year.
9. Contract Labor
Freelancer and independent contractor labor fees are deductible.
10. Business Supplies
The cost of supplies used to run your business is deductible and can include a wide array of items including:
- Office Supplies
- Postage
- Containers
- Packaging
- Manufacturing expenses
And much more! Just be sure to track inventory and supplies separately. If you happen to use any inventory for your personal use, remember to reduce the cost from your yearly inventory.
11. Rental or Business Property
Renting out an office, factory, storefront, or any business facility is deductible.
12. Utilities
Utilities related to your office or workspace including electricity, gas, garbage, and water, are considered tax deductible.
13. Additional Taxes
You can deduct licenses, regulatory fees, and taxes on personal property. Other deductible taxes on business assets include:
- Fuel taxes
- Personal property tax
- Vehicle tax
- Real estate tax
- Excise tax
- State and local income tax