Lower Your Income Tax Bill With These Small Business Tax Deductions

Let me start out by saying I am not a tax accountant, so the following is for information purposes only… check with your tax accounting professionals for advice on taxable small business deductions.

If you have a small business, one of the best ways to lower your income tax bill is to make sure that you’re claiming all eligible tax write-offs available to you.

What Exactly Is A Tax Write-Off?

If you're paying taxes you're familiar with tax deductions, also known as a tax write-off, that can lower your taxable income.

And if you have a small business, you can write-off your business expenses.

Below you’ll find a list of small business write-offs commonly available to business owners… a checklist you can refer to.

Please note that certain deductions in this list may not be available to your small business. Consult with your tax advisor or CPA before claiming a deduction on your tax return.

In order to claim these deductions, you’ll need to keep accurate records and keep up with your bookkeeping.

The Top 8 Small Business Tax Deductions

Each of the following expenses is one-hundred-percent tax-deductible.

1. Advertising, Marketing, and Promotion

The cost of advertising, marketing, and promotion can include items such as:

• Hiring someone to design a business logo
• The cost of printing business cards or brochures
• Purchasing ad space in print or online media
• Sending cards to clients
• Launching a new website
• Running a social media marketing campaign

2. Business Meals

You can typically deduct 50% of qualifying food and beverage costs. To be eligible for the deduction:

• The expense must be an ordinary and necessary part of carrying on your business
• The meal cannot be lavish or extravagant under the circumstances
• The business owner or an employee must be present at the meal

You can also deduct 50% of the cost of providing meals to employees, such as purchasing dinner when your team is working late. Meals provided at office parties and picnics are 100% deductible.

Be sure to keep documentation for the outing that includes the amount of each expense, the date and place of the meal, and the business relationship of the person with who you dined… and hang on to any receipts.

A good way to do this is to record the purpose of the meal and what you discussed on the back of the receipt.

3. Business Insurance

You can deduct the premiums you pay for business insurance.

This may include:

• Property coverage for your furniture, equipment, and buildings
• Liability coverage
• Group health, dental and vision insurance for employees
• Professional liability or malpractice insurance
• Workers compensation coverage
• Auto insurance for business vehicles
• Life insurance that covers employees, as long as the business or business owner is not a beneficiary on the policy
• Business interruption insurance that covers lost profits if your business is shut down due to fire or another cause

4. Bank Fees

Having separate business bank accounts and credit cards is ideal.  If your bank or credit card company charges annual or monthly service charges, transfer fees, or overdraft fees, they are deductible.

You can also deduct merchant or transaction fees paid to a third-party payment processor, such as PayPal or Stripe.

If you use personal accounts and credit cards, these fees may not be deductible.

5. Business Use Of Your Automobile

Do you use your car, truck, SUV, or van for business? If you use your vehicle solely for business purposes, then you can deduct the entire cost of operating the vehicle. If you use it for both business and personal trips, you can only deduct the costs associated with business-related usage… usually, a mileage cost as outlined by the IRS.

There are actually two (2) methods for deducting vehicle expenses, and you can choose whichever one gives you a greater tax benefit. They are as follows…

•  Standard mileage rate. Multiply the miles driven for business during the year by a standard mileage rate. The standard mileage deduction is currently $0.58 per mile.
• Actual expense method. Track all of the costs of operating the vehicle for the year, including gas, oil, repairs, tires, insurance, registration fees, and lease payments. Multiply those expenses by the percentage of miles driven for your business.

Both methods require that you track your business miles for the year. You can keep a detailed log of your business miles, use an app to track your trips or reconstruct a mileage log using other documents, such as calendars or appointment books.

If you keep a mileage log, clearly document the miles driven, time and place, and business purpose of your trip.

If you're not working from home and have to travel to your place of business, please note that you cannot count the miles driven while commuting between your home and your regular place of business.

6. Home Office Expenses

If you use a home office for your business, you may be able to deduct a portion of your housing expenses against business income. There are actually two (2) ways to deduct home office expenses.

Simplified method. You can deduct $5 per square foot of your home that is used for business, up to a maximum of 300 square feet.

Standard method. Track all actual expenses of maintaining your home, such as mortgage interest or rent, utilities, real estate taxes, housekeeping and landscaping service, homeowners association fees, and repairs. Multiply these expenses by the percentage of your home devoted to business use.

To use this deduction you have to have a designated room as your office.

7. Legal And Professional Fees

Legal and professional fees that are necessary and directly related to running your business are deductible. These include fees charged by lawyers, accountants, bookkeepers, tax preparation experts, and business advisors.

If the fees include payments for work of a personal nature (for example, creating a will), you can only deduct the part of the fee that’s related to the business.

8. Education

Did you know that education costs are fully deductible when they add value to your business and increase your expertise? In order to decide if your class or workshop qualifies, the IRS will look at whether the expense maintains or improves skills that are required in your current business.

The following list contains examples of valid business education expenses:

• Classes to improve skills in your field
• Seminars and Webinars
• Subscriptions to trade or professional publications
• Books tailored to your industry
• Workshops to increase your expertise and skills
• Transportation expenses to and from classes
• Travel expenses associated with training events

In addition to the top eight (8) tax deductions as listed above, as a small business owner you can also write off Depreciation of Business Assets, Interest Paid On Loans, Moving Expenses, Rent Expenses, Licensing Fees, Telephone and Internet Expenses, and Travel Expenses to name a few.

So, if you've been thinking about investing in training, marketing, or any other expense, do it before the end of the year and take advantage of the tax savings come April.

Wishing you much business success.