5 Small Business Tax Deductions You May Be Missing Out On

5 Small Business Tax Deductions You May Be Missing Out On

As a small business owner, you’re already familiar with the challenges that come with running a successful business. Among these challenges is managing your expenses, which includes paying your taxes. However, did you know that there are various tax deductions you can claim to reduce your taxable income? Here are five small business tax deductions that you may be missing out on.

1. Home Office Expenses

If you’re running your business from home, you can claim home office expenses, which include utilities, internet, rent, and insurance. To claim these expenses, calculate the percentage of your home that you use for business and use that percentage to determine the portion of your expenses that are deductible.

2. Startup Costs

Starting a new business comes with many expenses, including legal fees, marketing costs, and research expenses. Fortunately, these expenses are tax-deductible and can be claimed in the year that they are incurred. Additionally, you can carry forward any startup costs that you are unable to deduct in the first year.

3. Business Use of Personal Vehicle

If you use your personal vehicle for business purposes, you can claim a deduction for the miles driven. The rate is currently 58 cents per mile, and you can either claim the standard mileage rate or the actual expenses incurred.

4. Retirement Contributions

Small business owners can contribute to their own retirement accounts and receive significant tax deductions. Contributions can be made to a traditional IRA, a simplified employee pension (SEP) plan, or a solo 401(k) plan. These plans allow for contributions up to $57,000 per year, with catch-up contributions available if you’re over the age of 50.

5. Depreciation

Depreciation is a tax deduction that allows business owners to deduct the cost of assets over time. This deduction applies to equipment and machinery that have a useful life of more than one year. Different methods can be used to calculate depreciation, including the straight-line method, the declining balance method, and the sum-of-the-years method.

In Conclusion

While managing your business expenses can be challenging, there are many tax deductions available to help ease the financial burden. By claiming the deductions outlined in this article, you can help reduce your taxable income and save money on your taxes. Keep in mind that tax laws can change, so it’s always advisable to consult with your accountant or tax professional to ensure that you’re taking advantage of all available deductions.