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Okay, you’ve launched your startup, and now your first tax season is near. Getting caught with flat feet can get expensive, so you want to avoid that. You can also register a package if you know how. Here are the main tax deductions for small businesses.
A tax deduction reduces the tax liability of an individual or entity by reducing its taxable income. Typically, deductions are expenses incurred that can be applied to their gross income to calculate the liability.
If you run a small business, you certainly want to take advantage of the various deductions to which you may be entitled. Check out the following:
Deduct vehicle costs
If you use your commute for business, you can recoup at least some of these costs. This is because you can deduct all operating costs if you use your car exclusively for business purposes. We’re talking about repairs, fuel, mileage, etc.
Where it gets difficult is if you are using your vehicle for personal and business purposes. You will need to determine the commercial part, so keep good records.
Home work expenses
If you are working from your notebook, you can probably deduct these costs from your business income. There are two different methods – simplified and standard – so do your homework and see which one works best for you.
Unless an employee is a business partner, LLC member, or sole proprietor, you can deduct wages and salaries, if they meet industry standards. You can also subtract paid time off.
Small Business Tax Deductions also extends to office supplies – shipping equipment, tools, paper – so be sure to keep your receipts. These deductions can add up.
Yes, those new desks and chairs? What about computers, printers and phones? You can deduct everything, up to five thousand dollars.
Whatever you pay for ads, promotions, and general marketing, you can subtract it. We’re talking business cards, logos, print or digital ads, or website design, etc.
You can write off utility payments for your physical accommodation and part of the bills if you are working from a home office. For the latter, you can subtract 10% from your utility bill if your office represents at least 10% of the area of ââyour home.
Business trips can also be deducted, so be sure to keep receipts for expenses such as hotel, parking, transportation, and food. To be eligible, these expenses must be necessary and not incurred in your operating state.
Yes, those too, if the insurance policy is needed and for your business. These insurance policies include commercial property, general liability, workers’ compensation and data breach.
If you have fees for legal or other professional services, you can write them off as well. These deductions can include payments to CPAs, lawyers and bookkeepers, etc.
Depreciation of company assets
You might not have thought about it, but such depreciation – due to wear and tear or age – can usually be deducted, allowing you to reduce an asset’s value over time. Use Form 4562 when you file your annual taxes.
Now that you are aware of the main tax deductions for small businesses, you can start recording all of your receipts and keeping proper records so that you can get back what is rightfully yours. Well, you want to keep your taxable income as low as possible, right?
To get it right, you should get help from an established profession or organization. Good deduction !