25 Great Small Business Owner Tax Deductions
If you ask a bunch of entrepreneurs what they consider a big part of their business, you may often hear that it is taking advantage of all allowable small business owner tax deductions. Small businesses are the major job creators in this country, and tax regulations have often given them special consideration to spur this activity.
While there are many highly specialized tax deductions for some business types, the 25 small business owner tax deductions in this article apply to almost every businessi. Taking advantage of them will maximize retained income while minimizing taxes.
- Other taxes – Other taxes that you pay to the state or local municipalities are small business owner tax deductions on your federal tax return. This could also include any fees you pay for licensing or permitting for the operation of your business.
- Rental of business property – If you rent your building for business, rents are deductible business expenses.
- Utilities – Utilities that are for the business property, including electricity, water, sewer, natural gas, or propane, etc. are all small business owner tax deductions.
- Home office deduction – When it comes to this deduction, there are details, limitations, and different ways to calculate it. However, consult with an accountant and take the deductions you are authorized for an office in the home.
- Professional fees – Legal, accounting, and consulting fees for business purposes are valid small business owner tax deductions. At least you can feel good about consulting with an accountant or tax preparer when you know the government is footing part of the bill.
- Business meals – If you entertain clients or hold business related meetings at a meal, it is 50% deductible as a business expense.
- Rent paid for machinery or equipment – The costs of renting machinery, vehicles, or equipment for the business is deductible.
- Interest on business debt – If you have credit card debt for business expenses or other secured or unsecured business debt, you can deduct the interest paid during the tax year.
- Bad debts – If you have debts owed to you by customers or clients or unpaid uncollectable invoices or store charges, you can deduct the amount owed as bad debt.
- Insurance – Premiums you pay for any type of insurance for the business are deductible. This includes business property insurance, liability insurance, malpractice, or other insurance policies. These premiums are small business owner tax deductions.
- Repairs – Repairs to any business equipment, buildings, vehicles, or furniture are deductible expenses as well.
- Commissions – If you pay salespeople commissions, you can deduct them as you would wages. If you pay commissions to others for services rendered, they are also deductible.
- Travel – Expenses for travel related to business are deductible, including air fare, hotels, and other expenses.
- Marketing and advertising – All marketing and advertising costs to promote and grow your business are deductible.
- Vehicle expenses – Car and truck expenses for fuel, repairs, insurance, and other expenses for vehicle business use are deductible.
- Salaries and Wages – Salaries and wages paid to employees and some owners are allowable small business owner tax deductions.
- Contract labor – If you use freelancers for business work, you can deduct the fees that you pay them. Be sure that you are not afoul of IRS checks to determine whether they are an independent contractor or an employee.
- Supplies – Supplies can refer to expendable items used in the business for care of the business or in products. You can deduct their cost in the year purchased, but if you buy in bulk and store them, check with an accountant as to if they are inventory or not.
- Depreciation – Some equipment and all real estate structures must be depreciated rather than full cost deducted. You use the IRS defined lifespan and the cost/value to determine the annual amount of the depreciation deduction.
- Employee benefit programs and qualified retirement plans – This gets complicated, so work with an accountant. If you are providing employee benefits, the cost is likely fully deductible in the tax year expended. Business contributions to qualified retirement plans are also small business owner tax deductions.
- Mortgage interest – If you purchase real estate for the business, the mortgage interest is deductible.
- Office expenses – From paper clips to office furniture, everything you use to manage your business and run your office are small business owner tax deductions.
- Loss Carryovers – There are some expenses or situations that preclude you from deductions unless there are profits to offset them. In other words, you can’t be losing money and take some deductions, as you’re only allowed to deduct them against income. However, you don’t lose them. You can carry them over to future tax years and deduct them when things are better.
- Miscellaneous business expenses – There will be expenses that do not fit into these or other normal categories, but they are still deductible if they are reasonable and customary in the operation of your business.
- QBI (Qualified Business Income) deduction – With some exceptions or limitations, if you have a pass-through business with income passed to you for filing on your personal return, you can take a QBI deduction of 20% off that passed-through income.
Small business owner tax deductions help to make up for the hard work and long hours of running a business.
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