6 Big Tax Deductions For Small Business Owners
As business owners prepare to finish out the year, it is time to look forward to filing taxes. While it may involve some extra work, knowing which tax deductions to claim can result in huge savings, even for new companies.
All payments made on leased equipment can be itemized as tax deductions. From the office copier on up to medical, agricultural, and construction, and manufacturing equipment – it it is being leased, it is deductible. Keep in mind that the IRS only allows deductions totaling $500,000 per year.
Since many software suites, ranging from Microsoft Office to cloud based accounting, are now subscription based, they are also deductible. Software subscriptions fall under the same Section 179 guidelines as leased equipment, and therefore can be listed as tax deductions.
Do You Drive For Your Business?
If you drive for your business, you can actually claim your mileage as a tax deduction. Provided you have the appropriate documentation, you can take your total mileage and multiply it by the latest amount offered by the IRS. The IRS cannot be expected to keep track of the price of gas at every pump in the United States, which is why they offer a flat rate, which usually falls between 50 and 60 cents per mile.
If you are self-employed, and you are paying for your own health insurance premiums, then those payments count as tax deductions. There is one big caveat, however. The deductions cannot exceed the net profit of your business. The IRS has a tendency to frown on that type of creative math.
Much like health insurance premiums, is you are running your own business, and paying into your own retirement plans, then those expenses are deductible. Also like health insurance premiums, those tax deductions cannot be more than your net profit.
This is perhaps one of the easiest tax deductions to figure out, because there is no “magic formula” like there is with equipment depreciation or mileage. When you receive our monthly phone bill, circle the charges for the business calls, and keep a running tally. Those charges are fully deductible. If you conduct business from a mobile phone with a calling and data plan, simply deduct the percentage of time you spend using the phone for business.
Many More Tax Deductions
We have only listed a few of the most overlooked tax deductions for small businesses. If you really want to dig into other deductions, such as those for employing family members, consult with your accountant, or visit the IRS web site.