Top Tax Breaks for Your Small Business
If you own a small business, you are eligible for a number of deductions to help minimize your tax liability. While you cannot deduct all of your expenses, some are fully deductible. Understanding the deductions available to you can help you make more informed business decisions, save money and potentially pay less taxes.
Therefore, it is beneficial to pay close attention to the IRS regulations about what is and isn’t deductible.
Tax Deduction List for Small Businesses
- Car expenses
The IRS allows and encourages business owners to deduct auto expenses on their tax returns. To figure out what you are allowed to deduct and how to go about doing it, you will need to keep a record of several different things. To deduct auto expenses, you need to keep a record of your vehicle’s annual mileage, your business use of the vehicle during the year, and the amount of gas used to run the vehicle. You also need to deduct the costs of parking fees. Plus, you need to keep a record of the value of your trade-in, dealer discounts, and other expenses.
- Books and legal professional fees
Business books are entirely deductible as operating expenses. There are two reasons for deducting these. One is that tax, accounting and bookkeeping services are considered part of the cost of doing business. The second is the principle that people who run a business have to pay the same taxes as everyone else. However, this does not mean that all business books are tax deductible. Business books must be used in the operation of the business. Principles and guidelines that can be used without any reference to your business are not deductible.
- Expenses of going into business
If you are starting a business, it is important to know how to manage the money and taxes. One thing you should consider is how to figure out how much money you will be paying in taxes. There are some general things you should know about taxes and a business before you open your doors. First, the costs of starting a business are considered tax-deductible. Advertising, utilities, office supplies, and repairs can all be written off as current business costs if you own a company, but not until you actually open for business.
4. Travel
You can deduct travel costs for a business trip. When you travel for business, you can write off a variety of expenses, including your plane ticket, car rental fees, taxi fares, hotel stays, meals, sending business items, laundry bills, phone calls, and gratuities.
If you use your car for business, you can deduct miles driven from your home to your first business stop and then to your final business stop. You can also deduct miles driven between separate business stops.
5. Interest
The cost of borrowing money is not deductible. Businesses are treated as separate entities and they are allowed to borrow money and deduct the interest the same as any other business expense.
However, you can only write off 30% of your interest costs if your company’s profit is greater than $25 million. Businesses who deal in real estate and have gross receipts of more than $25 million might choose to opt out of the 30% restriction by agreeing to extend the depreciation term for their real estate.
Keep thorough documents that show how the funds were used for your company.
Now that you have the checklist of tax breaks for your small business, you are ready to start looking for ways to save. Remember to keep good records and use the checklist we provided to make sure you get every tax break possible.