As a small business there is one entity that you never want to cross paths with; the IRS. That doesn’t mean, however, that you’re not entitled to any tax deductions. In fact, there a number of tax deductions that you as a small business are eligible for if you meet the guidelines established by the IRS.
1. Automobile Expenses
If you use your vehicle for work there are a number of expenses that you can deduct. The most obvious is deducting the money you spent on gasoline, but everything from insurance, registration, licenses, and maintenance expenses like car washes and new tires are fair game.
2. Business Travel
If you or your employees go on the road for business, you can deduct airfare, lodging, drycleaning, and 50% of your meals. Even renting essential work related equipment and entertaining prospective clients can be deducted.
3. Home Office
If you use part of your home for your small business, which is quite possible if you’re one of the more than 53 million freelancers in the U.S., then you probably could qualify for a number of generous deductions. The IRS offer a simplified option to make computing the business use of your use easier to calculate.
4. Startup Costs
Did you know that you can claim expenses that were incurred before you even launched your business? Whether it was conducting research or taking a potential client out to lunch, don’t forget to look over these startup costs.
If you take a course to improve your skills you can claim your continuing education as a deduction.
As mentioned on the American Express OPEN Forum, “inventory items aren’t immediately deductible.” However, “a business with inventory uses the accrual method of accounting and includes inventory items in the cost of goods sold, which reduces the amount of income recognized on the sales. Under a special rule, however, certain small businesses can use the cash method of accounting and opt to treat inventory items as materials and supplies, which are currently deductible.”
7. Health Insurance Premiums
If you fewer than 25 full-time employees, or are self-employed, you can deduct qualifying health care premiums or the premiums you paid through an insurance plan.
8. Office Supplies
Even if you don’t take advantage of the home office deductions, you can still claim office supplies ranging from furniture to computers.
9. New Equipment
Section 179 of the Internal Revenue Code gives you the opportunity to deduct up to $500,000 off the cost of new equipment or other assets.
10. Accounting and Legal Fees
The fees attributed to lawyers, accountants, or consultants are eligible for tax deductions.
11. Cellphones and Landlines
If you have a cellphone of landline dedicated solely for business use, then you can deduct the expense.
12. Bank Fees
Checking account fees and, ATM withdrawals, and any other fees that your business has accumulated are deductible.
13. Bad Debts
14. Charitable Donations
Your business is allowed to deduct contributions, and even the use of property, to qualified organizations. In most cases, this cannot be more than 50% of your adjusted gross income.
15. Board Meetings
Whenever your board of directors gather for a meeting they can compensate for travel and service expenses, and even entertainment costs. Even if the board consists of just your and your spouse, you can still take advantage of this deduction. Just remember to keep detailed records that validate that the meeting was business related.
The IRS states that businesses “generally can deduct reasonable advertising expenses that are directly related to your business activities.”
17. Business Association Membership/Labor Dues
Nolo.com notes that “the dues you pay to professional, business, and civic organizations are deductible business expenses as long as the organization’s main purpose is not to provide entertainment facilities to members.” Also, these can include the dues that are paid to professional organizations, trade associations, local chambers of commerce, and civic or public service organizations.
18. Interest Payments
If you have purchased new equipment, for example, and are financing it then you can deduct the interest as a business expense.
19. Employee Benefits/Wages/Reimbursements
Business owners are allowed to deduct the benefits, wages, and reimbursements like travel expenses that they have made to their employees throughout the year.
If you’ve offered any trade or cash discounts then you can file them with Form 3115. The IRS says when it comes to cash discounts there are two methods when handling cash discounts, “You can either credit them to a separate discount account or deduct them from total purchases for the year.”
21. Convention and Trade Shows
If you have attended a convention or trade show that is directly related to your business then you can deduct the cost of participating.
22. Cleaning/Janitorial Services
You’re allowed to write-off cleaning supplies and cleaning/janitorial services as well. Additionally, Chron.com suggests that you “multiply the percentage you calculate by your annual cleaning-related costs to arrive at your cleaning write-off.”
23. Retirement Tax Credit
If you’re self-employed and putting money into retirement fund like a SEP IRA or Keogh then you can deduct that contribution.
24. Hiring Your Kids
If you operate as a sole proprietor or as a partnership and hire your children you may be able to avoid income tax. If you child is under the age of 17 you aren’t responsible for Social Security tax and you can also deduct their salary as a business expense
If you missed out on claiming home deductions, charitable contributions, or capital losses from previous years then you may be able to include those deductions now.
Since there are lots of possible deductions with strict guidelines in place, it’s in your best interest to meet with your CPA and discuss any possible deductions that you may overlooked without getting in trouble with the IRS.