Tax Deductions Every Business Should Know

Small businesses often miss out on valuable tax deductions that could save them thousands of dollars each year. Knowing which deductions you’re eligible for can significantly lower your tax liability and free up cash to reinvest in your business. Here are the top tax deductions every small business should know about.

1. Home Office Deduction
If you run your business from home, you may qualify for a home office deduction. This deduction allows you to write off a portion of your rent or mortgage, utilities, and maintenance costs.
Requirements: The space must be used exclusively for business.
Tip: Use the simplified deduction method (based on square footage) or calculate actual expenses for greater accuracy.

2. Business Vehicle Expenses
If you use your car for business purposes, you can deduct vehicle-related expenses such as fuel, maintenance, and insurance. Alternatively, you can use the IRS standard mileage rate.
Tip: Keep a detailed log of your business mileage, including dates, destinations, and purposes.

3. Professional Services and Fees
Payments to accountants, bookkeepers, lawyers, or other professional services providers are fully deductible. These services are essential for keeping your business running smoothly.
Tip: Retain invoices or contracts as proof of these expenses.

4. Marketing and Advertising Costs
Expenses related to promoting your business, such as social media ads, website development, and print materials, are tax-deductible.
Tip: Track all advertising costs, including those from freelancers or agencies.

5. Office Supplies and Equipment
Items like pens, paper, and computers can be deducted in the year they are purchased. For larger equipment, you may use depreciation to spread the deduction over several years.
Tip: Save receipts for all purchases and classify them correctly in your bookkeeping system.

6. Employee Salaries and Benefits
Wages, salaries, and employee benefits such as health insurance and retirement contributions are deductible business expenses.
Tip: Ensure all employee payments are well-documented and compliant with IRS requirements.

7. Travel Expenses
If you travel for business, expenses like airfare, lodging, and meals may be deductible. However, the trip must have a clear business purpose.
Tip: Keep itineraries, receipts, and notes about the business purpose of your travel.

8. Education and Training
Courses, certifications, and training programs related to your business are deductible. This includes both online and in-person education.
Tip: Document the relevance of the training to your business.

9. Utilities and Rent
Utility costs for your office space and rent paid for commercial property are deductible.
Tip: For shared spaces, deduct only the portion used for business.

10. Bad Debt
If your business extended credit to a customer and they didn’t pay, you may be able to write off the unpaid amount as bad debt.
Tip: Work with your accountant to determine if the debt qualifies.

Maximizing your deductions can reduce your taxable income and boost your bottom line. By staying informed and organized, you can take full advantage of these tax benefits. Not sure where to start? Let our tax preparation experts guide you through the process.

Schedule a consultation with us today to ensure you’re capturing every deduction you’re entitled.