The United States tax system is notoriously complicated. In fact, the tax code recently hit nearly 4 million words. For small businesses, that can mean missing out on big chunks of cash. But we’re here to help. We’ve nailed down some of the top small business tax deductions. Read on for the six business write offs that are worth a second look.
Do Small Business Tax Deductions Matter?
It’s easy to miss out on deductions. And tax evasion can come at big costs. In fact, it cost the government more than $450 billion in recent years. For small businesses, tax mistakes can mean big fines, legal penalties, or criminal prosecution. But they can also mean missing out on extra money. And overlooking small business deductions can add up fast. Here are the top six small business tax deductions owners should remember to flag for their accountants:
1. Travel Costs
Travel expenses, like hotel stays, are fully deductible. And business travelers can write off much of their meal costs. The travel costs just need to be associated with the business. Mileage is another one of the top business deductions that often go overlooked. It’s a good idea to save receipts and track mileage through a log.
2. Health Care Costs
Exact amounts can vary, but lots of healthcare costs are deductible for small businesses. In many cases, a business can deduct the cost of insurance it pays for employees. And owners of businesses that earn a profit can grab a self-employment insurance deduction in many instances.
3. Advertising Expenses
When it comes to small business deductions, most owners forget about promotional costs. These count as business write offs. That means costs for things like marketing, promotions, and websites can be deducted.
4. Home Office
If part of the home is regularly set aside as a place of business, business owners can save on costs. And that can be direct and indirect costs. Direct costs are things like painting or upkeep. And indirect costs could include a part of rent costs or mortgage interest.
5. Charitable Gifts
Any cash or in-kind donations a business makes to a charity can be deducted. Just make sure the organization is a 501(c)(3) non-profit. It’s a good idea to get a receipt for any donations that the company makes, and hang onto it.
6. Leasehold Improvements
What’s a leasehold improvement? These are things like shop renovations or workspace upgrades. And that includes things like permits that were required for renovations. A good way to know if an upgrade is a leasehold improvement is to decide if it’s attached to the property. If the owner can take the item with them when they leave, it probably isn’t a leasehold improvement. Here are some common types of leasehold improvements:
- Plumbing work
- Carpeting or flooring
- Fees for architecture or design
Getting the Most Out of Taxes
These top small business tax deductions should help owners get more out of taxes. But it isn’t always easy to keep track of items in an efficient, professional way. We can help. Check out our bookkeeping section here to see how pro bookkeepers can help small businesses excel.