The Small Business Income Tax Write-offs List
Anyone considering going into business for themselves, no matter how small, should know that a small business is a path to tax savings as shown by this income tax write-offs list. These are not all the deductions available to small businesses, but these are the most common that apply. There will be more specialized deductions for specialty businesses.
Production, Cost of Goods and Services Delivery Expenses
These are expenses required to produce your products for sale or to perform services that you sell to customers. They can include:
- Production, assembly, and packaging of products.
- Expenses to buy materials used in producing products.
- Expenses for services performance such as brooms, mops, cleaning supplies, etc. for a cleaning business.
These are expenses related to your business location, whether retail, production, or anywhere you serve clients on premises (not home, see home office later). These can include:
- Rent for your space, store, or office.
- If you purchase a building, you can depreciate the structure’s value over time, taking a portion each year as a deduction.
- Maintenance expenses including landscaping, cleaning, and repairs.
- Local government fees and permits.
Marketing and Advertising
Most businesses do various types of marketing, advertising, and promotion of their business to bring in customers, including:
- Print advertising in newspapers and magazines.
- Printed materials, including printing cost, such as brochures.
- Television and radio advertising.
- Internet ads and website expenses.
- Promotional materials such as logo pens, shirts, hats, refrigerator magnets, etc.
- Labor to produce products, including benefits costs for employees.
- Hired subcontractors or freelancers.
- Cost of benefits furnished employees. This can include medical care, health insurance, etc.
- Training and education costs for employees if related to their jobs.
- Personal training for owner(s) if business-related.
- Costs to advertise, interview, and hire employees or freelancers.
There are various types of insurance a business may need, including:
- Casualty insurance for structures.
- Liability insurance to cover possible customer accidents on site.
- Workers compensation insurance for injuries on the job.
- Vehicle insurance for business vehicles and liability.
- Product liability insurance.
- Malpractice insurance.
- Partnership or key person insurance to compensate the business for loss of a key person.
There are instances while doing business when you must use the services of others, and you can deduct the costs including:
- Attorney fees for advice or litigation.
- Certified Public Accountant for financial advice or planning.
- Tax preparation.
- Specialty business consultants.
- Background checks or other employee or client research.
If you use vehicles exclusively for the conduct of your business, there are related expenses you can deduct, such as:
- Insurance for the vehicles.
- Fuel and maintenance.
- Registration and government fees.
- Marketing messages on the vehicle.
If you use a personal vehicle for some business tasks, you can deduct expenses in one of two ways, both based on keeping a record of the business mileage. If you want to take the actual expenses deduction, you will then determine the percentage of business use and apply it to the expenses for the deduction. If you want a simpler method, just take the mileage deduction, for 2021 it is $0.56 per business mile.
Startup and Organizational Costs
There are costs associated with starting a business, most must be depreciated over time, resulting in annual deductions, including:
- Consultants or professionals hired to help with the startup.
- Business tax entity advice and formation costs. This includes cost to set up corporations.
The costs to house and store inventory, including any security devices or services are deductible expenses. Spoilage or theft losses are deductible as well.
Office Overhead Expenses
For many businesses, the costs of management and maintaining the overhead functions can be extensive. They are for the most part deductible, including:
- Computers, printers, office machines.
- Paper and other expendables.
- Internet and Wi-Fi services.
- Subscriptions related to operating the business.
- Telephones and phone services.
This is a partial list of the most common business expenses that are deductible from business income before taxes. Consider it your starting small business income tax write-offs list.