Small business tax deductions can reduce business income, which lowers the amount of tax owed. One advantage that the self-employed and small businesses have are various tax deductions and credits. Using PriorTax for your small business would also qualify as a tax deduction. For example, if you own a business property, you can claim the associated mortgage interest as a business expense and tax deduction. Sole proprietorships, LLCs, and partnerships can not deduct charitable contributions as a business expense. Still, the small business owner may be able to claim the deduction on the business owner’s personal tax return. Our dedicated tax professionals will know how to record these expenses in your books so they can be accurately reflected on your tax return as a business expense. In a nutshell, small business owners can maximize their tax refund by decreasing their business income and increasing their business deductions. Lowering your net business income will reduce the amount of income taxes due, thus improving your chances of getting a tax refund. It is vital to keep your business income as low as possible so that you can take advantage of all possible deductions.
As a small business owner, it is vital to ensure you take every measure available to reduce your small business taxation. While much of your capital may be taken away each year, here are 10 deductions you should be aware of as you look back at your previous tax year and plan for the future. Keeping these tips in mind can help keep more money in the bank while still maintaining compliance with small business tax regulations.
To maximize your tax refund as a small business owner, you should familiarize yourself with the various tax deductions available to your business. Business owners who are employed and self-employed can qualify to use these deductions and credits to lower their taxable income. Here are our top 10 pieces of advice for maximizing your small business tax refund.
1. Record all service fees from legal, consulting, and professional services for small business taxes
Entrepreneurs need to ensure their legal and professional costs are properly documented. Although consulting with experts on tax issues and regulations is an essential part of running a successful business, the fees paid to these professionals can generally be deducted in the same year incurred. Furthermore, business owners may also be able to claim expenses incurred from purchasing books related to driving their company or practicing law.
2 Take advantage of upstarting costs and expenses when filing small business tax returns.
When launching a new business, one should use the deductions available for start-up costs and other expenditures. In the initial years of operations, many start-up costs can be written off when filing taxes. Furthermore, items such as office equipment and supplies, shipping fees, and utility bills may also be deducted from taxable income.
3. Keep track of new equipment or software purchases.
Keep tabs on the acquisitions of new tools or programs. Several small businesses are eligible for a deduction on the cost of certain assets in the same year it is bought. Meanwhile, software usually has to be subtracted gradually over an extended period.
4. Use your car for business purposes.
When running a business, it pays to consider using your car as a means of saving money. Whether you are utilizing your own vehicle or one owned by the enterprise, various costs associated with it can be deducted from taxes. This includes expenses such as the standard mileage rate, parking fees, tolls, and specific amounts of depreciation.
5. Deduct advertising expenses effectively from filing your small business tax.
One should pay attention to the potential deductions for marketing or advertising expenses. This could include spending on business cards, electronic and paper advertisements, and trade show participation costs. All of these can be claimed under current business expenses.
6. Include membership and educational expenses.
When it comes to business expenses, remember to factor in membership fees and educational costs. This includes the cost of joining a professional association related to your business or even fees associated with attending seminars such as CLEs (Continuing Legal Education).
7. Don’t forget to make interest payments be part of tax filing.
Maximize the value of your interest. When buying items for business purposes, it is beneficial to use credit as this allows you to deduct the interest from your taxes. All expenses must be documented thoroughly in order to ensure eligibility for said deductions.
8. Keep receipts for entertainment expenses.
Make sure you hang onto your receipts when it comes to entertainment expenses. By taking meticulous records of coffee runs, dining out, and any other company-related outings, you can deduct such costs from your taxes.
9. See if charitable contributions and donations can be included.
Donating to charity can be beneficial in more ways than one. Unless the business is a corporation, most charitable contributions to suitable institutions are tax deductible. It is essential that individuals keep proof of their donations, such as receipts, canceled checks, or written acknowledgment from the organization. This will ensure they have records of their generous contributions.
10. Save your tax documents for at least 5 years.
Organizing your record is critical when it comes to tax records, and it’s important to hang on to them for at least 5 years. Not only will good record-keeping save you time, but it could also save you money. Maintain copies of your tax returns, receipts from expenses, mileage logs, licenses, and incorporation papers to verify deductions.