Most Common Small Business Tax Deductions

A tax deduction or tax write-off is an expense that you can deduct from your taxable income. A tax deduction allows you to pay smaller tax bills. By deducting an expense on your tax return, you’re lowering your business taxable income and thus tax liability. You can invest more money to grow your small business that you owe to the IRS every year. 

Most small businesses use a car, van or a small truck for business purposes. Cars can be used to drive for meetings with the clients or using a light truck to transport equipment. If you can prove that you use a vehicle for business purposes, you can deduct expenses from your income. You can deduct these expenses in two ways:

A.  Use the standard mileage rate:

B.  Add up your actual car related expenses:

You will be able to deduct expenses for the business use of your home, which include mortgage interest or rent, real estate taxes, housekeeping or landscaping service, homeowners association fees, insurance, utilities, repairs and depreciation. The small business owner can deduct $5 for every square foot of your home office and the limit is up to 300 square feet. But this deduction is only allowed if the home office space is regularly used for business purposes only.  

 You can deduct mortgage interest in your business own realty. 

According to the new tax law, small businesses including S corporation, partnership, sole proprietorship, LLCs will be able to deduct 20% of their income on their taxes. The Tax Cuts and Jobs Act of 2017 made significant changes to the tax code. For small businesses it was the creation of qualified business income deduction. For example you have earned $1,00,000 in profit, so now you can deduct $20,000 before ordinary income tax rates apply to you. 

The good news is that the rent for your office space that goes up every year is also deductible. It can include a bakery shop, boutique, factory, an office space for a small business such as a salon, travel company etc.

You are eligible to deduct the cost of printing business cards on your tax return. So, basically anything you use to promote your business to bring in new customers from social media ads to billboards, all is 100% deductible. 

Every business requires stocking up on traditional office supplies such as printer inks, pens, post-it notes. These office supplies are totally deductible. You can also write off any newly purchased Smartphone, laptop or software for your small business. 

You’re in luck! Everything you spend on utility bills (electricity, phone, internet, water, heat and sewage) for your business is fully deductible. 

If you require repairing your office property or it just requires regular maintenance to keep running efficiently, you can write off these costs on your taxes too. 

Many small business owners have to travel for business purposes. But of course! These expenses of travelling and staying comes with a price. But there is some good news here! You can deduct those expenses for you and for your employees if the trip is taken for a business purpose. For this you need to meet some substantial requirements to claim any travel deduction. However, local commute costs remain not deductible. 

A business meeting taken out at a restaurant with your client  is 50% deductible provided the expense is a necessary part of your business, the owner or the employee must be present at the time of meal and lastly the meal has to fall under certain circumstances. 

The wages, salaries, bonuses, commissions, vacation time paid are all tax deductible business expenses for your employees. You can also deduct contributions to their retirement plans, education assistance and most other employee benefit program costs. Payments made to sole proprietorship, partnership and LLC members are not included as wages because they aren’t employees of the business. 

You can write off many taxes of state and local income taxes, estate tax, sales tax and personal property taxes of $10,000. You may deduct Audit Support and payroll taxes, fuel taxes, excise taxes, occupational taxes, business licenses etc. 

 You are at an advantage to deduct legal and professional fees charged by lawyers, bookkeepers and accountants related to your business operations. 

 If telephone and internet are integral to your business, they can be deductible as well. Keep in mind, if you have a landline at home , you cannot deduct the cost of your first line even if it’s used for business purposes. 

 Commission and fees are fully deductible and may require form 1099-NEC for 2020. But, commissions paid in connection with buying realty are not deductible. These are usually recovered through depreciation and added to the basis of property. 

To save money for your business, you need to claim all tax deductions possible. It is advisable to consult with your accountant before claiming a tax deduction for your Small Business Accounting Services.