No matter whether you own or work for yourself, knowing the IRS-approved tax deductions available to you could save a substantial sum come tax season.
Tax deductions (also referred to as tax write-offs) are expenses that reduce how much of your income is taxed, thus leading to a smaller tax bill.
1. Business Insurance
Keep your business insured as part of a tax deduction plan, thanks to the IRS allowing small business owners to write off liability, malpractice and property insurance costs as an expense deduction. This can significantly lower taxable income while supporting financial health of your organization.
As with other expenses, some expenses you may not realize are tax deductible are marketing and promotional materials like business cards, flyers and online advertising campaigns. Advertising agency fees as well as legal, accounting and consulting service costs may also be tax deductible; plus any office supplies used exclusively for your business may qualify for deduction.
Make sure to save receipts and document these expenses for future deduction. Finally, if your business was established after 2024 you can utilize the new qualified business income (QBI) deduction which allows up to 20% of QBI to be expensed as expenses; be sure to discuss this deduction with a CPA or tax professional as certain expenses such as home offices and travel may not qualify as qualifying deductions.
2. Advertising
As most businesses depend on marketing and advertising expenses to build and expand their customer bases, many must invest in marketing and advertising efforts. Luckily, these expenses are 100% tax deductible! This applies to digital and print ads as well as content campaigns, billboards and more; only condition is that expenses must be considered “ordinary and necessary” to your business.
Employee training and education expenses are an often forgotten tax deduction. These costs include fees paid for seminars, workshops, conferences and tradeshows that allow employees to expand their knowledge in areas related to your business.
Securing and claiming legitimate small business tax deductions can significantly decrease your tax liability and free up resources to invest in growing your business. With so many rules and exceptions surrounding tax laws, keeping up can seem like an intimidating task – fortunately a SCORE mentor can be of assistance! Book a call with them today.
3. Home Office Expenses
Home office expenses can be an invaluable resource for small businesses. Whether you use the regular method or opt for safe harbor simplified deduction, keeping accurate records is critical in meeting IRS guidelines and staying compliant.
To claim the home office deduction, you must demonstrate that your office is used exclusively and regularly for business. Simply using one client meeting per month as an excuse to utilize your spare room may not qualify you as meeting this criterion.
Deductible expenses associated with maintaining your home office space include both direct and indirect expenses related to maintaining it. Examples of direct expenses could include repairs and repainting as well as purchasing furniture for it; indirect expenses like property taxes and homeowner’s insurance are proportionally deductible depending on how much of your home space is dedicated to business activities.
To claim your home office deduction, fill out Schedule C and provide a detailed home office use plan that records expenses and hours spent working from home. Keeping accurate and comprehensive records will help to ensure your deduction is properly reported while protecting you against audits.
4. Business Phone Expenses
Cell phones are an essential element of modern business operations, yet it can be easy to forget their tax deductibility. If possible, obtain an itemized phone bill and only claim for usage that directly pertains to business use.
Cell phone accessories and apps that assist your work can also be tax-deductible; this could range from basic notepad apps to mileage trackers. Just make sure that you keep all receipts and documentation just in case the IRS audits you.
Tax deductions can help your business thrive by lowering its taxable income, so make sure to carefully track expenses throughout the year and utilize all eligible business tax deductions to maximize profits. SoFi can connect you with lenders who offer competitive small business loans; start exploring options instantly!
5. Business Travel
Those operating a small business can write off many expenses. Knowing which deductions you qualify for can make tax season less daunting.
The IRS defines deductible business expenses as those “ordinary and necessary,” and there are numerous expenses you can claim as tax-deductible expenses. Common examples are office supplies, equipment/rent payments, staff salaries and insurance; but you could save significant money with lesser known expenses that you might not know exist!
Travel costs can be deducted 100 percent tax-deductibly; to do so, they must be business related and 75% of your trip must focus on business activities. If unsure whether your travel qualifies, speak to a SCORE mentor for advice; additionally, receipts or cancelled checks should always be kept for all tax deductible expenses, even when paying with reward points – they provide evidence if an IRS audit occurs.
