Small Business Tax Deduction Checklist

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For some small business owners, the phrase “tax deductions” is music to the ears. Yet, many are not fully aware of some deductions that might be available to them. Or they are simply not as diligent about tracking expenses and saving receipts as they could be.

If you are not working with a tax planning professional and assessing all your potential deductions, you might be paying more in taxes than you’re required to pay—and keeping less of your hard-earned money. To help you get started, EP Wealth Advisors has prepared this guide to common small-business tax deductions—some of which might surprise you.

Home Office Deductions

According to Pew Research, one-third of U.S. workers currently work from home. If you run a small business out of your home, the simplest way to calculate your deduction is to use the current IRS guidelines.

At this time, the standard IRS deduction is $5 per square foot of the home up to 300 square feet or $1,500. But there is a caveat: You must have a dedicated space in your home that is used exclusively for business (your couch or coffee table probably doesn’t count).

Rent, Insurance, and Utilities

Whether you work from home or run your small business out of a separate property, a wide range of deductions related to your workspace might be available. Your annual rent or lease payments can be a sizable deduction. Generally, it’s also possible to deduct utility, insurance, maintenance, depreciation, and repair costs for your office space.

Office Supplies and Equipment

Ink, paper, pencils, and pens may not seem like a big expense, but when combined over the course of a year, they can add up to an impressive deduction. Computer software subscriptions and renewals can also be deductible. If you use computers and other tech devices more than 50% of the time for business, you can possibly claim them, too. Desks, chairs, and other essential office furniture may be deductible as well. To determine what exactly qualifies for deductions, consult with a financial advisor.

Vehicle and Travel Expenses

If you use your vehicle for work purposes, you can possibly deduct a portion of the cost of a new vehicle, along with mileage related to your work. The standard mileage deduction process is you have to log odometer readings from the beginning and end of a qualifying trip, along with its purpose and date. You can also claim expenses like lease payments, insurance, gas, and tolls.

If you use the same vehicle for personal and business use, it can be more challenging to keep track of your trips, but it is worthwhile if you do a lot of driving. Travel expenses for work trips are often deductible as well. They include the costs of: plane or train tickets, lodging, and meals.

Professional Fees

Small-business owners can wear many hats. But sometimes they cannot do it all. They depend on a network of professionals to guide them in various aspects of the business. Fees for lawyers, accountants, marketing experts, computer professionals, and other consultants can potentially be deductible.

Advertising and Marketing

If you promote your business through advertising and marketing, you may be able to claim money spent on these services. These deductions include things like social media campaigns, billboards, online and print advertisements.

Education and Training

Professional development is a great way to grow your skillset and offer more value to clients and customers. Fees for education and training can be generally deductible. This includes online courses, in-person workshops, and certification programs related to your industry.

Interest on Business Loans

If you borrow money from a financial institution to fund your small business, payments on the loan’s principle are generally not tax-deductible. However, you can possibly be able to write off interest you pay on the loan. And the proceeds of a business loan are not usually counted as income toward your taxes. To claim interest, you must show you used the funds for business, and you have proof of repayment.

Insurance Premiums

There may also be a number of insurance premiums you could potentially take as well. For example, health insurance, workers’ compensation insurance, life insurance, unemployment insurance, and liability insurance may all be deductible. These premiums must be “ordinary and necessary” and used for business, trade, or professional reasons.

Employee Wages and Benefits

Small business owners can generally claim their employees’ salaries. This category includes fees for freelancers, sole-properties, and independent contractors—which are fully tax deductible. Certain benefit programs can be written off also. Education assistance, dependent care, and qualified retirement accounts may qualify.

When in doubt, save every invoice, receipt, and payments related to your business. Good record-keeping takes time and organization, but it pays off when tax time rolls around. There are plenty of low-cost, user-friendly business expenses trackers available online.

Work With a Financial Advisor at EP Wealth

This list is extensive—but far from complete. If you feel overwhelmed by all the possible deductions for the tax year, EP Wealth’s tax planning team can review your business plan to see what possibilities can be available to you.

We’ll work with you to build a tax planning strategy that aligns with your financial goals. To learn more about how EP Wealth Advisors can help you build a plan for you, contact an advisor today.

 

 

 

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