Small businesses owners are often oblivious on how much money they can save by making use of tax deductions. Sometimes, oblivion is the result of ignorance or the fear of itemizing every expense incurred by the business.
If any gain is to result from tax deductions, a business needs to keep proper records and organize their business affairs. In this regard, it would be helpful to put an accountant on retainer. However, if you are up to the task, here are 21 tax deductions that you may benefit from to make your business more financially efficient.
In America, small businesses can save up to $5000 in deductions in their first year of business. These deductions cover the initial period of market research and any costs incurred in trying to set up the business.
Inventory-based businesses are allowed to deduct the cost of goods (stock) from their tax bill. The deduction applies to businesses that manufacture their products or those that purchase goods for resale.
Small businesses can also recover money spent on settling utility bills such as power, telephone, garbage, and water. This deduction covers the full cost of the bills.
Insurance expenses are fully deductible from the tax owed. Any insurance policy taken to cover any element of the business may be included in the calculation of this deduction. The relief extends to the business owner’s health policy, business owner’s policy and business continuation policy.
Did you know that you can deduct the full cost of your business property rent from your taxes? If you run your business from home, you can request an eligibility test from the IRS to establish whether you qualify for the relief.
The expenses incurred in operating any vehicle owned by your business can be deducted from your tax bill. Expenses in this regard include service, gas and insurance.
If you regularly lease equipment for business purposes, be sure to maintain a record of the cost incurred. Equipment can be anything such as printer, photocopiers, vehicles, cameras and other machinery.
If you utilize any commercials software, any money paid to cater to such an expense can be deducted from your taxes. It does not matter whether you fully purchased the software or are paid a periodic subscription, keep the receipts.
You are encouraged to promote your business through advertising and marketing. These expenses will be removed from your taxable income when paying your taxes. You need to show that advertising or marketing is related to your business. You also need proof of payment. Advertising in any of its varied forms is covered under this head.
Tax deductions extend to any costs incurred in acquiring and maintaining office furniture.
When you do your office shopping, keep a record of all purchases made. Expenses related to the purchase of stationery such as paper, pens, paper clips, and paper towels, among other items, are 100 per cent deductible.
All those flights and taxi rides to attend business meetings and conferences can be removed from your taxable income. The costs of delivery of products are categorized as business travel expenses too.
You are allowed to have some fun at work. In this regard, however, business entertainment only refers to the entertainment of clients. Entertainment includes meals and events.
If you are servicing a business loan, you can deduct any interest paid towards the loan from your tax bill at the end of the financial year.
Bad business debts written off can also form part of the deductions made from your taxable income.
It is bizarre that you can deduct the costs of business taxes from your tax bill. It does not matter that the taxes are federal, state or local. The deduction also covers real estate tax, sales tax, and taxes in relation to employment.
Money spent on employee salaries is fully deductible.
Some employee benefit schemes can be deducted from your taxes. Examples are life insurance, education assistance, and certain retirement plans.
Good businesses often appreciate their employees with gifts and bonuses. These gifts can be deducted up to $25 for each employee annually.
Any money paid to a professional for services rendered to the business is fully deductible. Such services include legal fees, consultation fees, psychologists’ fees and others.
Lastly, if your business hires independent contractors or freelancers, it might benefit from 100% tax deductions on the costs of hiring.
In essence, any legitimate business expense can be an eligible tax deduction. If you can prove that you incurred that expense, you will definitely benefit from a lot of tax deductions.