Ten Most Common Tax Deductions for Small Businesses

We all know that as a taxpayer, times are bad enough, but as a small business owner, you need to be vigilant about your tax situation and take full advantage of the great tax breaks available to you. To neglect this attention, is to risk greater profit losses and as a worst case scenario, be faced with issues that could force you out of business. There are many tax breaks you as a small business owner can take advantage of, so you do not leave money on the table. Some of the most commonly missed tax deductions for small business are:

1.   Vehicle Expenses

If you use your vehicle for business related activities, such as picking up supplies, attending meetings, or entertaining clients, you can take advantage of the mileage deduction, but remember to keep track of your miles driven.

If you don’t take a mileage deduction you can, instead, take a deduction for the maintenance of your vehicle by subtracting such expenses as fuel, parts, labor and repairs, in addition to which you may also depreciate the vehicle itself, over a period of 5 years.

2.    Education Expenses 

Any seminars, workshops or classes that you take to improve your business or knowledge of the business, are tax deductible, as are the travel costs included in the excursions.

3.    Travel Expenses 

Tolls, airfare, hotels, parking, taxi fees, as well as cleaning costs and a portion of meals, are all allowable deductions. Make sure you retain your receipts and keep accurate records so that you can document the expenses; creating a log of sorts to track the expenses, even without all your receipts, is tremendously helpful come tax time.

4.    Communication Expenses 

Your phone lines, cellular phones, long distance charges, your internet hook-up and fax line are all deductible expenses.

5.    Advertising and Other Business Expenses 

Also part of your business expenses for maintaining and promoting your business, can be deducted. While large deductions are nice, don’t forget all the small things you need to keep your business afloat. Don’t overlook such things as coffee and beverage service, postage, paper clips and other desk supplies, gifts to clients, fees to banking services, dues to business organizations, business-related publications, tax preparation fees and even labor performed by family members or children, such as hanging posters or stuffing envelopes. All of these small things can add up in a hurry and expand the range of your business deductions.

6.    Home Office Expenses 

Don’t forget you can take a lucrative deduction for having a separate room in your home where you consistently conduct your business affairs. A percentage of your mortgage interest, homeowners insurance, property and real estate taxes, as well as repairs and maintenance, can be taken on the portion of the home placed in business use.

7.    Self-Employed Health Insurance Premiums

As a self-employed business owner, taking full advantage of group health benefits can be tremendously advantageous. The benefits provided to employees and their dependents are generally deductible, though subject to limitations. Your own health benefits under the plan are also 100% deductible.

If you are a sole proprietor, you might consider obtaining a health insurance policy in your own name rather than the name of your business. In this way your health insurance benefits will also be deductible.

Insurance for fire, accident and theft as well as liability, worker’s comp and malpractice insurance premiums are also deductible.

8.    Sales Taxes 

You can deduct all sales tax you pay on business property or new equipment, if you are incorporated. Just as the items you purchase are tax deductible, so are the taxes you pay.

9.    Retirement Plans

Contributions you make to your own IRA or 401K plan, SEP IRA, or SIMPLE IRA, as well as employee contributions are deductible on your business tax return. See the IRS Publication 560, for specific details about how to make the most out of contributions to such plans.

10. Upfront Depreciation 

You can take a Section 179 deduction to claim a deduction up to $125,000 on depreciable property, such as equipment, furniture, machinery, fixtures and even storage units.

Your small business deserves every dollar it gets, take the time to explore and claim everything you can, and should claim, on your next tax return. By determining what tax breaks you can take advantage of, you will increase your bottom-line. Your sales will have the opportunity to increase while your costs of doing business will decrease, making for the most lucrative business asset possible.

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