While another tax season has now passed, it is never too early to start planning for next year's taxes. In particular, as a small business owner, you will want to make sure that you take advantage of all of the tax deductions available to small business owners for business expenses. While the IRS offers a fairly in-depth guide on deducting business expenses, here are a few key deductions many small business owners might miss.
In addition to taking a deduction for the indirect expenses your small business incurs, you can also take a deduction for any business/office supplies you may have bought throughout the year. This is why it is important to keep any business related receipts so that you can keep track of what you spent on your business. You can also deduct the cost of any large purchases you made for your business throughout the year such as office furniture, computers, copiers, fax machines, or any other equipment purchased for your business. When you make deductions for large business purchases, you will have the option to either deduct 100 percent of the cost in the year of purchase, or you can choose to deduct a portion of the expense over several years (this is known as depreciation).
For a new or growing small business, investing in advertising and marketing is an essential part of bringing in new customers and clients. Fortunately, for business owners, costs for advertising, marketing, and promotion are 100% deductible. This includes a range of promotional materials that you'll need to help get your name out there to the ones that need to see it.
For brick and mortar locations that need to cultivate business locally, costs that revolve around physical promotional materials, such as brochures, mailers, etc are included. In addition to traditional advertising initiatives, digital marketing is included as well. Whether you need a new website or desire to invest in social media and Google advertising campaigns, your business can take the deduction.
You can't run a business without business insurance. While this is a necessary part of operations for any company, the good news is that you can deduct the premiums that you pay for the business insurance. These premiums may be different based on the nature of your business.
A wide range of businesses in many industries can reap the benefits of these deductions. Common necessities such as group health, vision, and dental insurance for a company's employees, as well as their workers compensation are eligible. Companies that depend on equipment and brick and mortar locations can deduct premiums for property coverage in relation to equipment or buildings. The auto insurance premiums for any company vehicles are also able to be deducted. For physicians, the premiums associated with your malpractice insurance qualify.
If your job often takes you on the road and you find yourself putting on the miles, there is some relief when it comes to tax time. If you use a personal vehicle for work, you are able to deduct all of the costs associated with the usage as it relates to business. Personal usage is not eligible for this. If the vehicle is used for business purposes only, then the entire cost of operation of the vehicle is eligible for the deduction. It should be noted, however, that miles driven from home to office do not qualify as business purposes. In the eyes of this deduction, that is a personal expense.
When it comes to deductions related to business-related vehicle use, there are two routes you can take for deducting vehicle expenses. A decision between the two can be made based on which one provides a greater tax benefit to the owner.
No matter the method you find is best for your situation, you will need to be sure to track your business-related miles throughout the year. Find the method that works best for you when it comes to tracking accurately. Some choose detailed logs, others utilize helpful apps, or simply make notes in their planners and calendars.
Many small business owners are surprised to discover just how many deductions are available to them. It is then important that you take some time before next tax season to determine what deductions you may be eligible for. However, it is vital that you consult either the IRS's guide to deducting business expenses, or a skilled certified public accountant, in order to ensure that you follow procedure when taking these deductions.
Contact us to learn more about small business tax deductions as well as to find out how we can help you to begin planning for next tax season.
For more information on the latest tax reform, check out our simplified guide below.
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