Posted by Abundant Wealth Planning LLC

Small Businesses Deductible Expenses

Small Businesses Deductible Expenses

There are many different expenses that small businesses are allowed to deduct on their annual tax returns. These deductions vary from business to business; however, the standard deductions are basically the same straight across the border. Here are some of the expenses that small businesses are allowed to claim:

New Equipment Deduction

Some assets can be deducted in full in the year you buy them. Section 179 states that small businesses can deduct an annual threshold amount of the cost of certain business assets and equipment bought and placed into operations that same year. Real estate, property bought from close relatives and inventory bought for resale are a few assets that do not qualify for deductions under Section 179.

Deduction paid for moving expenses

There are certain non-deductible moving expenses that taxpayers may claim if they move because of their business or job. To qualify for this deduction, your move must be in connection with your business. Your new place of business must be at least 50 miles further than your old business was from your home in order for you to qualify for this deduction. Because moving expenses are in no way business expenses, there is a special section on Form 1040 tax return where these claims must be made.

Claiming deductions for software

As a general rule of thought, all software used in the operation of your business must be depreciated over a 3 year period; however, there are certain exceptions to this rule:

·         All computers that your business started using as of January 1, 2003 through December 31, 2014, are eligible to be filed under Section 179 deductions.

·         If software comes with a computer and its cost is not stated separately, the software will be treated as part of the computer’s hardware and can be depreciated over a five year period. If the total cost paid for a computer is listed under Section 179, small businesses can write off the computer on a whole, even if it’s bundled with software.

Charitable deductions

S corporations, partnerships and limited liability companies can make charitable donations and claim the deductions under the owner’s name. This means that you can file this donation as a personal deduction tax, rather than as a business tax.

Donating computers and furniture, even old ones to a school or not-for-profit organizations can provide wonderful tax benefits; however, ensure that the things you donate are not completely written off because if they are, you cannot claim a deduction.

Operation taxes

Most operation taxes are deductible. All taxes levied during the operation of your business are normally deductible. However, when and how they are deducted is determined based on the different types of taxes.

·         Excise and fuel are deductible as separate expenses.

·         Sales tax levied on goods bought for the day-to-day operations of your business are deductible as part of the item’s costs.

·         While state income taxes can be deducted on federal, Federal income taxes are not deductible.

·         The employer’s share of the employment tax is deductible as a business expense.

·         Real estate taxes paid for property used to conduct business is deductible

Education expenses

Education expenses can be deducted once they relate to your current occupation, trade or business. The education expenses that are deducted are expenses, gained to improve or maintain your skills in your current employment area.

Advertising and promotions deductions

Advertising expenses that cover the advertisement of services or goods offered as well as for the creation of advertising materials such as yellow page ads and business cards are deducted as a current expense. Sponsorships are also deductible; however, the event or activity you sponsor must be related to your area of business.

Understanding your taxes and getting a better look into the things Abundant Wealth Planning LLC can offer you, is the best way to stay informed and be one step ahead of the game. While Abundant Wealth Planning LLC’s Tax Preparers are educated and versed in what they do, knowledge is power and knowing what you are allowed to deduct from your annual taxes is the very first step to becoming an empowered taxpayer. 



Abundant Wealth Planning LLC
Contact Member