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Commonly Overlooked Small Business Tax Deductions

Updated on January 17th, 2022

For many small business owners, tax season is a dreaded time that they’d rather be done with as soon as possible.

While it’s not fun to go through every tiny detail of the financial side of your business and cross your fingers that there are no issues with the IRS later down the line, it would be wise to go over everything in detail in order to make sure you take advantage of all the tax deductions available to you.

It’s no secret that business owners pay a ton of money in taxes when compared to the traditional employee. Being able to deduct expenses can lower your taxable income which is good news for you.

Here are a few commonly overlooked small business tax deductions that you might want to consider.

Home Office Deduction

If you work from home, you may be able to qualify for the home office deduction. In order to receive this deduction, you must use the space in your home:

  • Exclusively and regularly as your principal place of business
  • Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business

You cannot deduct expenses like mortgage interest, rent, real estate taxes, utilities, and maintenance just because you work from home.

If you have a work desk in your bedroom or family area, you probably won’t be able to make this deduction either since space isn’t solely used for your business.

If you an extra bedroom or den that you use exclusively as your office space, you can most likely make the deduction.

You can read more about the deduction for filing 2016 taxes here.

Accounting Fees

This may seem minor, but if paying accounting fees puts a dent in your wallet, you can deduct these expenses on your taxes.

You most likely have to hire an accountant and pay fees anyway, so you might as well deduct these expenses.

Auto and Transportation Fees

Do you use your car at all for business whether it’s to get to and from meetings or your coworking space? You may be able to deduct the costs of operating and maintaining your vehicle.

You can deduct expenses like gas, tolls, parking fees etc. and in terms of mileage deductions, you can use the IRS’s standard mileage rate for each mile your car was used for business purposes.

When it comes to other methods of travel for your business, be sure to write those expenses off too. If you flew to another state for a conference and stayed in a hotel, you can deduct those expenses. Even the food you eat can be deducted if it’s a part of a business lunch during a conference or workshop for example.

Losses on Bad Debts

If you happened to loan money to clients, distributors, employees etc. and haven’t yet been repaid, you might be able to deduct the loss.

If you’ve tried to collect the debt for a reasonable amount of time and took the necessary steps to follow up with the borrower and remained unsuccessful, the IRS will most likely let you write the expense off on your taxes as a bad debt.

Summary: Get Organized and Make Sure You Qualify For Certain Deductions

This list barely scratched the surface in terms of expenses you can deduct on your business taxes. You can also deduct things like your cell phone or internet bill, health insurance premiums, education expenses and courses, fees for contractors and more.

This is why it’s important to keep track of all your expenses throughout the year so you won’t have a huge and stressful overhaul around tax time. I’d recommend using a spreadsheet to remain organized and talking to your accountant to make sure you qualify for the deductions you’re taking.

It’s not a good idea to just write things off to improve your tax situation when you really don’t qualify for the benefits. That could come back to bite you later down the road so make sure you always double check with a tax professional and keep up-to-date with the latest tax code to make sure you’re in compliance.

Choncé Maddox

Choncé Maddox

Choncé Maddox is a debt expert. She helps ambitious millennials and Generation Z get our of the mounds of debt they are in following college. In 2015 she realized she couldn’t afford to do her own laundry, she was so broke. She had to make a change. Over the next three years she personally tackled $50,000 in debt and became debt free. She teaches others her passion since.

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