Everybody has to pay taxes, but in today’s economy, it doesn’t hurt anyone more than small businesses. They pay thousands of dollars in taxes every year, but thanks to tax deductions, these companies don’t need to pay more than necessary. It’s important that you recognize and utilize the tax deductions available to you as a business. There’s no sense paying more than you have to during tax season. Though tax deductions will vary by business, here are some of the most common tax deductions you can utilize.
1. Auto Expenses
There are certain tax deductions available to companies that use automobiles for business purposes. If your business owns its own vehicle, you can deduct some of the initial cost, the mileage, and even routine maintenance. Remember that if you use a car for both business and pleasure, you may only deduct the costs associated with the business portion of use. You can also deduct taxes when you rent a car for your business. In this case, 100 percent of the rental fee, fuel, mileage, and insurance can be deducted.
Remember that if you want to get the most out of your deduction, it’s always a good idea to get auto insurance to cover your rental car, but the costs can be high if you get them from a dealer. According to Protect Your Bubble, the best way to save is to “buy protection before you get to the counter – and save big.” Auto rental insurance is a tax-deductible service that will keep you from losing all the benefits of your tax write offs when you need to pay for a damaged rental car.
2. Travel Expenses
Any traveling you do for your business can be deducted come tax season, including plane fares, cab rides, and mileage. Besides that, your meals, hotels, faxes, tips, lodging, and shipping costs are all tax deductible.
The best part is, you can still enjoy a little fun on your business trips and deduct it, as long as business is the main purpose of the trip. This means that you can attend a business meeting all day and then go out to a show at night, and still deduct your expenses. However, if you take guests along for pleasure, only your costs may be deducted.
3. Entertaining
If you throw a party for your employees, such as a picnic, cocktail hour, or Christmas social, these events are 100 percent deductible. You can also deduct 50 percent of all business-related entertainment that has to do with clients. Note: This is a change from previous years when you could deduct 80-100 percent of all business entertainment expenses. This type of entertainment could mean taking a client out or inviting valued customers to dinner.
“Keep in mind that if you are audited, you must be able to show some proof that the entertainment expense was either directly related to, or associated with, business,” according to Nolo. This applies to outings with clients, and it’s advised that you keep a guest list and a detailed description of the outing. However, parties with your employees do not need to be documented so carefully.
4. Marketing
Ordinary advertising and promotion is deductible as a current expense. This includes business cards, newspaper ads, digital ads, and more. Besides donating to a charitable cause, here are some of the most commonly overlooked marketing expenses, according to Nolo.
- coffee and office beverages
- publicity
- audio and video related to business
- contracts
- business-related magazines and books
- casual labor
- postage
- casualty and theft losses
- bank service charges
- consultant fees
- credit fees
- ·office supplies
- telephone calls away from the business
- ·online computer services related to business
- parking and meter fees
- business gifts and incentives
- seminars
- trade shows
- taxi and bus fare
- petty cash
5. Home Office
If you run your small business from home, you can actually deduct the square footage that you use as an office. The easiest way to do this is to simply deduct $5 per square foot with a $1500 limit as the IRS’s simplified home office deduction. However, many have found that they receive more by performing a complicated calculation that takes into account the mortgage and other home-related expenses. Either way, you can receive a great deduction on your small business expenses.