Running a small business is challenging, and owners often wear many hats, including that of accountant. Navigating taxes can be tricky, and it’s easy to overlook deductions that could save your business money. The tax code is complex, but you have many legal opportunities to reduce your tax burden. Here are some commonly missed tax deductions that your small business may be able to take advantage of:
Office and Home Expenses
Do you work from a home office? If so, you may be able to deduct a portion of your housing costs, including rent, utilities, insurance, and repairs. This deduction is based on the percentage of your home that is used exclusively for business purposes. For example, if you use a spare bedroom as your office and it makes up 10% of your home’s total square footage, you can deduct 10% of your housing costs. Keep in mind that this deduction can get complicated, so it’s important to consult with a tax professional to ensure you’re taking the deduction correctly and maximizing your savings.
Additionally, if you rent an office space outside of your home, those expenses are also deductible. This includes rent, utilities, and any maintenance or repairs specifically for that space. If you own the office space, you can deduct mortgage interest, property taxes, and insurance costs. However, these deductions may be limited if your business uses only a small portion of the total space available.
Supplies and Equipment
Office supplies and operational equipment are deductible business expenses. This includes items like computers, software, furniture, and other materials used in your day-to-day operations. You can also write off expenses for repairs and maintenance on this equipment. If you purchase a new piece of equipment, you may be able to deduct the entire cost in the year it was purchased, or you can choose to depreciate the asset and spread the deduction over several years. It’s important to keep accurate records of these purchases and their respective values to ensure you’re taking the correct deduction amount.
Health Insurance and Benefits
As a small business owner, you can deduct the cost of your health insurance premiums for yourself, your spouse, and your dependents. This deduction is taken on your personal tax return, not your business return, and can be especially beneficial if you’re self-employed and purchasing insurance on your own. Additionally, if you offer health insurance or other benefits to your employees, those contributions are also deductible as business expenses. This can include insurance premiums, retirement plan contributions, and other fringe benefits offered to your workforce.
Professional Services and Education
The fees you pay for professional services, such as accounting, legal, or consulting services, are deductible business expenses. If you’ve hired lawyers, accountants, or other professionals to help run your business, their fees are tax-deductible. Similarly, memberships and subscriptions related to your industry or job function are also deductible. This could include trade publications, industry association fees, or subscription services that provide resources for your business. Investing in your education and that of your employees is also beneficial from a tax perspective. You can deduct the cost of courses, seminars, and training materials that maintain or improve skills required in your current business.
These are just a few of the many tax deductions available to small business owners. Each business is unique, so it’s important to consult with a tax professional to tailor a strategy that maximizes deductions and ensures compliance with the tax code. Taking advantage of these opportunities can help reduce your tax liability and free up resources to reinvest in your business’s growth and success. Be sure to keep accurate records and stay organized throughout the year to make tax season a breeze!