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Blog » Business Tips » 25 Tax Deductions Your Business Doesn’t Know About

25 Tax Deductions Your Business Doesn’t Know About

Updated on January 17th, 2022

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.

5. Education

If you take a course to improve your skills you can claim your continuing education as a deduction.

6. Inventory

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

According the IRS, “You can deduct business bad debts on Schedule C (Form 1040) or your applicable business income tax return”. This is a super easy and useful tax deduction.

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.

16. Advertising

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.

20. Discounts

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

25. Carryovers

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.

Peter Daisyme

Peter Daisyme

Peter Daisyme is the co-founder of Palo Alto, California-based Hostt, specializing in helping businesses with hosting their website for free, for life. Previously he was the co-founder of Pixloo, a company that helped people sell their homes online, that was acquired in 2012.

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