Deductions you can claim for your small business

As a small business owner, you are probably already aware of the difficulties presented to you by making it successfully in this world of corporations. In order to get the absolute best savings on your tax return, you know just how meticulous you need to be to make every dollar out of your pocket count. To ensure you get the maximum savings on your income tax return, give us a call at Tax Problem Resolutions, Inc. We want to make sure you leave no stone unturned and are able to get every deduction entitled to you.

A tax preparer might be a great resource for you to look into if you’re unsure what is deductible and what isn’t. You might be surprised at what limitations there are, and what things can be included on your tax return. The very basic principal of the small business deduction is that whatever you’re going to claim as a business expense must be both ordinary and necessary to your businesses industry. If you purchased an ice cream maker for a shoe store, unless you’re in the unique business of selling ice cream cones paired with shoes, you probably don’t have much of a leg to stand on. Some major expenses will be considered assets or capital expenses. Most business startup costs are going to fall under that category, and the same will go for improvements to your business. When it comes to your startup expenses though, you can only deduct $5,000 the first year. The rest will need to be divided up for deduction over the next 15 years. In regards to business improvements, for example, if you started a clothing design business and you decide to upgrade your sewing machine. This is going to be considered an asset to you so that would be a capital expense. The cost of goods sold is another facet of small business ownership you may encounter at tax time. If you’re a retailer of any sort, and sell goods as opposed to services, the cost of goods sold is determined by taking inventory at the beginning and end of the year and determining your inventories’ value. That amount is subtracted from your gross receipts and is used to determine your gross profit for the year.  An accountant will be able to help you draw the line between what you can deduct, how you can deduct it, and if you can deduct it on your federal tax return.

The following are some common business deductions small businesses can claim:

• Home Office Space or Home Work Space – A very large number of small businesses and entrepreneurs start up their small business in their very own homes. If their business is successful they may move to their own office or business space outside the home. In the even that your home houses your small business, you may be allowed to deduct some of the expenses related to your home. Mortgage insurance, taxes, utilities and repair just to name a few, but before deducting these expenses, you might want to find a tax preparer to help you determine just which ones are acceptable claims.
• Travel, Entertainment and Meals – The cost of entertaining clients or traveling to an investment meeting three states away should be taken into consideration when doing your tax return. Flights, meals, entertaining potential clients or investors, even car rental expenses and other transportation fees can be deducted as a business expense.
• Employee Wages – If you have employees that work for you, their compensation is deductible.
• Bad Debts – Loaning a supplier, client, or employee money that was never returned is also a deductible claim. There are some stipulations surrounding exactly what defines “bad debt” so make sure you’re well informed when looking into this as an option.
• Insurance – Business related insurance costs are eligible for deduction. Liability, casualty, theft, malpractice, and even health insurance are able to be claimed, as long as they are ordinary and necessary to your business.
• Professional and Legal Fees - If you hired a consultant to help you design your latest and greatest product? That expert’s fees are going to be deductible. The same goes for lawyers, accountants, even if you hire us to prepare your taxes; all of these fees can be deducted.
• Auto Expenses – There are two ways you can look at your automobile for a tax deduction for your small business. The actual expense method requires you to hang on to all receipts and documentation for the upkeep and use of your vehicle in relation to business expenses. If the vehicle is used primarily for your business; oil changes, repair work, and gas will all go towards this deduction. If you choose to go with the standard mileage rate deduction, you get to deduct a certain rate per mile, plus business related parking fees and tolls. If your vehicle is used for both personal and business purposes, you’ll need to keep track of expenses and mileage for the year and do the math based on how often it was used for business. You might want to find a tax professional for small business tax deductions to help you sort this one out, too.
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Taking advantage of the multiple allowable deductions on your federal tax return is very important in order for you and your small business to thrive. As always, your federal tax return can be a long and complicated venture. Please call me at Tax Problem Resolutions, Inc. at (407) 478-0999 and ask for me, Linda Biller personally. I’d love to help you make this filing as simple as possible. You can also click on the link below to check out our profile! Either way, I’ll make getting the most savings on your small business tax a breeze!