You’re running a small business, and every penny counts. But are you taking advantage of all the tax deductions available to you? If you’re not, you’re leaving money on the table.
Let’s delve into common tax write-offs you might be missing, from payroll taxes to home office expenses.
With a little knowledge and strategic tax planning, you can significantly decrease your tax liability and keep more money in your pocket.
What Are Small Business Tax Deductions/Write-Offs?
You’re probably wondering what small business tax deductions or write-offs are and how they can benefit your bottom line.
Well, these deductions are business-related expenses that you can write off on your taxes, thus lowering your taxable income and reducing the amount you owe the government.
It’s essential to understand what qualifies as a write-off to ensure efficient tax preparation. Generally, tax deductions should be based on expenses that are ordinary and necessary for running your business.
Separating your business and personal accounts will help you track these expenses effectively. From ATM fees to travel expenses and even meals, many overlooked deductions may help you save money.
Wages and Payroll Taxes
You are paying salaries and wages to your employees, but don’t forget that the payroll taxes associated with these can also be considered as tax deductions for your small business.
Being an employee in your own business has many benefits at tax time for your personal tax return. By paying yourself a wage or salary instead of a distribution or dividend, you will avoid paying a self-employment tax on your personal return. This strategy allows you to pass the payroll tax deduction to the business.
Remember, it’s not just your salary that is deductible. You should also claim all other employee wages and payroll taxes as deductions for the business.
Don’t miss out on these common tax deductions that can save your small business a substantial amount of money.
Travel Expenses/Phone and Internet Expenses While Travelling
Don’t overlook the deductions related to travel expenses, especially in terms of phone and internet costs incurred while on business trips. It’s important to understand that these costs can add up, and they’re often deductible if they’re directly related to your business activities.
When you’re away on business, you’re likely using your phone and internet for communication, researching, and managing your business. Keep track of these expenses, as they can significantly lower your taxable income. Consider using a separate phone for business or a dedicated business data plan. This way, you’ll have clear records of your business-related expenses.
Also, keep all receipts relating to travel, accommodation, and meals. These can also be deductible if they’re business-related.
Interestingly, as a new business owner, you can deduct your start-up costs, but it’s crucial to keep detailed records of these expenses.
Many entrepreneurs are unaware of this potential tax benefit. The IRS allows small businesses to deduct up to $5,000 in start-up costs on their first year’s tax return. These costs can include anything from market research and travel related to the business to advertising and employee training.
However, it’s essential to note that these deductions are subject to conditions and limitations. If your start-up costs exceed $50,000, the $5,000 limit begins to phase out. Therefore, careful record-keeping and understanding the tax regulations surrounding start-up costs can help you maximize these deductions and reduce your tax liability.
Home Office Expenses
If you’re running your business from home, it’s important to know that you can deduct a variety of home-related expenses as long as you’ve a dedicated office space in your home. Potential deductions can include homeowner’s insurance, utilities, property taxes, and home repairs.
However, the IRS is specific about what constitutes a home office. Casually working on your laptop from the kitchen table won’t cut it. It should be a dedicated space for your business and be your principal place of operation. Refer to IRS guidelines for a full understanding of the rules.
If your business aligns with these criteria, overlooking this deduction could be a costly mistake. Knowledge about such tax nuances can significantly cut down your tax bill.
Health Insurance Premiums
You’re navigating through tax deductions, and while home office expenses might’ve caught your attention, don’t overlook the deduction for health insurance premiums, as it can provide significant relief.
If you’re self-employed, you can claim all your health insurance premiums, not just the percentage that covers office-related injury or illness. This deduction is particularly beneficial if you have a high-cost plan or have had significant health expenses during the year.
It’s important to keep meticulous records, however, as the IRS may request evidence of your premium payments. Remember to separate these from other deductions like mileage, parking, and tolls.
Legal and Professional Fees
While you’re tracking your health insurance premiums, make sure you’re also noting any legal and professional fees, as they’re completely deductible and could save you a significant amount on your taxes. Whether you’ve hired business accounting services to untangle your financial situation or an attorney to navigate tricky legal waters, you can deduct 100% of these fees. But remember, these services must be directly related and necessary to running your business.
Don’t overlook this tax-saving opportunity, it’s an easy way to reduce your taxable income. So, keep a good record of these expenses. Being detail-oriented in maintaining your paperwork can result in considerable savings.
Marketing and Advertising
In your business, you’ve got two main marketing expenses: the cost of printing business cards and the fees for placing ads in local newspapers.
But don’t forget about other advertising costs that you can claim back on your taxes. This could include billboard advertising, Yellow Pages ads, or even the cost of hiring a freelancer to design your business logo.
You can also claim the expense of sending thank you cards to clients. It’s important to remember that as long as these expenses are related to your business, they’re tax-deductible.
It’s easy to overlook these deductions, but by keeping detailed records and claiming everything you’re entitled to, you can reduce your tax bill and keep more money in your business.
Let LBS Tax Services Help Your Small Business with Your Taxes
Let’s talk about how LBS Tax Services can provide invaluable assistance to your small business in handling your taxes. With over two decades of experience, we are dedicated to lifting the tax and accounting burden off your shoulders, allowing you to concentrate on making effective decisions for your business.
Here are some ways our LBS accounting team can help:
- We offer comprehensive tax consulting, including preparing your tax returns, auditing, and IRS representation.
- We will assist in maximizing deductions related to charitable donations, business expenses, and more, minimizing your tax liability.
- We provide expert guidance in setting business goals and managing cash flow.
Don’t let tax worries hinder your success. Let LBS Tax Services handle the complexities of tax regulations, ensuring you’re making the most informed decisions for your company.
Contact us today for an initial consultation to learn more about how we can help you save on your taxes.
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