Owning a small business can be an exciting and rewarding endeavor but it also comes with many financial responsibilities. One of the most important aspects of running a successful business is staying on top of all the tax deductions you qualify for. Fortunately, there is a small business tax planner that small business owners may not be aware of. Let’s take a look at five commonly overlooked deductions that could potentially save you some money come tax season.
5 Small Business Tax Deductions You Didn’t Know About
- Home Office Deduction – A home office deduction is available to those who use their home exclusively as their primary place of business or to meet with clients and customers. This will allow you to deduct a portion of your mortgage interest, property taxes, utilities, repairs, insurance premiums, and depreciation from your taxable income. The amount deducted will depend on the square footage used in your home office compared with the total square footage of your residence.
- Vehicle Expenses – If you require a vehicle for your business operations, such as making deliveries or driving to meetings, then certain operating costs may qualify as deductible expenses for tax purposes. This includes gas, oil changes, repairs and maintenance costs, insurance premiums, license fees, tires, and depreciation or lease payments paid over the course of the year. You should keep detailed records so that you have all the necessary information when filing taxes each year.
- Start-Up Costs – If you started up a new business this year then start-up costs associated with getting it off the ground may be deductible as an expense up to $5,000 in the first year after startup. After that initial deduction, any remaining costs can be amortized over 15 years if they exceed $50K in total expenditures in any given year after startup. This deduction is only applicable to businesses that are newly established rather than existing ones looking to expand their operations into new areas or markets.
4 . Professional Fees – If you’ve hired an accountant or lawyer throughout the year to help manage finances or legal matters related to running your business then these professional services would qualify as deductible expenses too. Be sure to keep invoices from any professionals you hire so you have proof when filing taxes next year.
- Retirement Plans – Setting up retirement plans for yourself and employees (if applicable) could provide considerable savings come tax time since contributions made towards those plans are typically classified as pre-tax deductions. Depending on which type of plan is chosen, contributions made towards retirement could lower self-employment taxes by anywhere from 15-20 % which can add up quickly when filing taxes next year.