Small Business Tax Deduction Tips

LAST REVIEWED Apr 13 2020 6 MIN READ

By Margarette Jung

This article is from our friends at Invoice2Go. Enjoy!

If you’re like most business owners, the discussion with your CPA is often an annual event and it can sometimes come a little too late — there might be invoices and receipts that you’ve since misplaced because you didn’t realize you could claim them on your taxes. It’s even more important to keep tabs on your tax deductions if you file tax estimates on a quarterly basis.

Tax legislation can be complex, and if you have a complicated financial situation or a lot of questions, you may want to work with an accountant for more personalize help. However, many small businesses operate in very similar ways, so we’ve put together a few key tax deductions that almost everyone can take advantage of.

The crucial point for all of these is to use simple tools to keep track of your invoices and receipts for your own sanity when you’re filing your taxes, providing the paperwork to an accountant, or if you need to provide proof for these costs for whatever reason down the road.

Startup Costs

Just launched a business? Or perhaps you’re thinking of starting one soon? You can claim a tax deduction on your upfront capital expenses – up to $5,000 the first year with the balance deductible over a fifteen year period.

Home Office Expenses

Do you maintain a dedicated office area at home? Home renovations related to the workspace can become deductible as can a percentage of your home insurance, mortgage, rates and utilities relative to the size of the office area. Additionally, although work commutes aren’t deductible, travel from a home office to a work related destination is (e.g. visiting a client) is deductible!

Employee Salaries and Benefits

Full- and part-time employees working for you are tax deductible, as are freelance workers and contractors. However under a new plan, the IRS will only charge 1/10th of the taxes for qualifying freelancers for one year. This is why categorizing your staff according to their proper legal designation is important!

A few other common tax deductions related to your employees:

Travel and Vehicle Insurance

Keep track of any mileage you do that is travel related with a mileage log book. If you’re undertaking business trips you can claim up to 100% of your travel costs. Vehicle insurance can also be deductible relative to the amount of work mileage you accumulate as a percentage of your total vehicle driving. Make sure to keep track of your gas receipts and log the mileage on your trips!

Credit Card Interest

Business-related interest costs on a company credit card are definitely tax deductible, but your personal credit card interest may also be tax deductible if you’ve used it for business-related expenses.

Unpaid Goods

If you sell goods but have yet to receive payment from a buyer you can be entitled to deduct this amount during your tax preparation. Note, however, this doesn’t apply when providing a service.

Education

Been upgrading your skills to make yourself a better business owner? Whether it’s university tuition or occupational training, these are tax deductions you are also entitled to.

Business Services

Services you use in the process of conducting your business are tax deductible expenses. Your merchant transaction fees, CRM software subscription, to the cost of your internet can be claimed if they are part of running your business.

Meals

Dinner with clients, working lunches, or other entertainment expenses with clients or prospective customers can be deductible, normally up to about 50% of the expense.

Running a small business is tough, and we know every dollar counts — keep these categories of expenses in mind as you do business throughout the year, and remember to err on the side of over-tracking your purchases and receipts so that you can easily provide the necessary paperwork as tax season approaches!

Margarette Jung is a former Head of Marketing at Human Interest.

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