For those small business owners who are overlooking to withhold business expenses on their tax return, you could be leaving money on the table. Whether you are setting up a shop or a well-known entrepreneur, you can save a huge amount of money in tax deductions. In order for you to receive a tax deduction, business expenses must be typical and necessary for the type of business you operate. Here are the 6 tax deductions that small business owners often forget.
- Costs to keep your business running
As you maintain your business, you are bound to avail advertising and office supplies. But, you can also write off office furniture, business calls and equipment repair payments. Current expenses are charges for services or equipment used every day to maintain a profitable business. They are normally used up in the first year, so you can deduct the total cost of current expenses on your tax return. Capital expenses are your business asset purchases that will improve your business in succeeding years.
- Home Office Rent and Fees
For those small business owners who work from home, deduct a portion of utility, insurance and rent payments if you have an office that is dedicated to business. You have to use your office consistently to take a full advantage of the home office deduction. Feel free to write reports, order materials, meet with clients, set appointments, take notes, bill customers and call clients in your office. But an office that you only use infrequently doesn’t count.
- Auto Payments
Whether you rent an office away from home, meet regularly with clients or own a real estate business, you can save a huge amount of money on your tax return. It is very important to keep an organized and well-detailed record of your car usage, and filling your state and federal income taxes will be as simple as doing a few math calculations.
- Entertainment and Travel Costs
If you have hosted a certain event for your business at your restaurant, office or another location, you can deduct entertainment expenses that helped promote business well-being or growth. Aside from this, you can also deduct moving costs if you had to relocate your home because of work. If the move was not directly related to your business, you can’t claim the deduction.
- Professional Fees and Educational Materials
Professional services, legal fees and business-related books are all fully deductible on your tax return. You are not just limited to independent contractors and books, if you avail a tax program, you can deduct tax preparation fees. If you own a business with hired employees, you can reduce taxes by deducting fringe benefits, bonuses and salaries.
- Bad Debts
You can save your money at the end of the year by keeping an organized and detailed record of business-related activities and purchases. It is also important to separate payments into marked categories. By doing this, you can save both money and time the next time you file taxes.
If you want to know more about other tax deductions that small business owners frequently forget, browsing the web can be a big help.