It’s quite simple – the more deductions you have for your small business, the less taxes you will pay on your return. Don’t cheat yourself out of any deductions, but by the same token be careful attention to IRS rules on what is deductible and what isn’t. While you might not overlook these deductions, they may overlook you if you fail to keep good records. So be sure to keep good records (receipts, etc).
Just about every expense that you have for your business is deductible and is deducted from your revenue to determine your “net profit” for tax purposes. It is obvious that the higher your “net profit”, the higher your income tax will be. But there are also other implications in addition to a higher income tax, including a higher self-employment tax (your portion of medical and social security taxes as a self-employed taxpayer).
The tax code is constantly in change and as a small business owner it’s a good time investment to familiarize yourself with new laws that are applicable to you, or at the minimum seek out the advice from a knowledgeable and credible tax professional. In addition, each year we post an update of tax code changes that you can review for tax changes that may apply to you.
On that note, here are several common deductions that are frequently forgotten by small business owners:
1. Rent expense
2. Home office deductions
3. Software and subscriptions
4. Auto expenses
5. Travel, meals, entertainment and gifts
6. Insurance premiums: workers compensation, business liability insurance, etc.
7. Taxes-Federal, state, local, etc
8. Telephone charges
9. Furniture and other equipment
10. Business start-up expenses
11. Legal and professional fees
13. Retirement plans
14. Employee and/or contractor pay
15. Office supplies
16. Advertising and marketing expenses
For more information about tax deductions, please see IRS Publication 535 or contact your local Liberty Tax Service Office.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.