Top 10 Tax Deductions for Small Businesses

11 Dec 2015
Tax Deductions

As a small business owner, you likely enjoy the great opportunity to be your own boss while working in a field you truly love. Unfortunately, self-employed people in this country also face a more significant tax burden. As a freelancer or small business owner, you are responsible for paying the self-employment tax in addition to traditional income taxes.

Self-employment (SE) taxes are akin to the Social Security and Medicare taxes removed from the paychecks of traditional employees. While employers pay half the SE contribution for their workers, self-employed people are on the hook for the full amount. The self-employment tax rate is 15.3 percent. In light of this undue burden, it’s crucial that small business owners take advantage of all possible deductions to minimize their taxable income.

“We understand the burden of keeping your financial house in order to operating your business efficiently,” said Michael Churchill of CPA Tax Services. “Businesses that stay on top of their accounting and tax requirements are far more profitable than those that don’t.”

Here are the top 10 deductions for small businesses:

 1. Auto Expenses

If you commute to see clients or purchase supplies, you might be able to deduct auto expenses from your taxable income. While it’s fine to use the same car for business and pleasure, small business owners can only deduct those costs associated with work. Keep careful records of travel and car maintenance costs to avoid potential audits down the line.

 2. Equipment

The cost of computers and other office equipment can pose a serious cash flow burden to the small business owner. Fortunately, this expense is tax deductible. Assets have to be depreciated. Speak to a tax advisor on how you can maximize your deduction.

 3. Promotion

Even small business owners need to put money into marketing and advertising. Luckily, costs related to promotion can be deducted. These items include promotional fliers, business cards, TV and print ads, and even web marketing.

 4. Debts

We’ve all had to deal with a client who doesn’t pay their debts. The IRS lets small business owners deduct expenses for goods that are sold but not paid for by the clients in question. Note that this benefit does not apply to services, only products. Speak to a tax advisor to see if you can write-off a bad debt.

 5. Travel

Does your business require you to travel on occasion? If so, don’t forget to deduct the cost of expenses like airfare, car rental, lodging, and meals from your annual income. As a cautionary note, small businesses can only deduct those expenses related to the business, so don’t try to write off your sightseeing adventures as well.

 6. Home Office

Do you operate your small business out of the house? Small businesses with home offices can deduct a portion of rent, utilities, and even housecleaning and maintenance or if you own your home, depreciation, property taxes, mortgage interest and more. Speak to a tax advisor to see how you can benefit.

 7. Internet

Few businesses can operate without a speedy Internet connection. Luckily, self-employed people can deduct the percentage of their Internet costs devoted to the business. The same holds true for cell phone bills.

8. Health Insurance

It’s no secret that health insurance premiums have skyrocketed in recent years. As a self-employed person, you shouldn’t forget to deduct the cost of premiums paid for yourself as well as those for a spouse and children.

9. Accounting

Determining one’s tax burden can be complex, and many small businesses opt to hire an accountant to ease the burden.  Small business owners can deduct tax preparation costs when the occur.

10. Self-Employment Tax

The self-employment tax can pose a serious burden to the average small business owner. To minimize the tax impact, remember to deduct the one-half of Social Security and Medicare taxes that would have been paid by an employer on your tax return. Speak to a tax advisor to make sure you don’t miss this deduction.

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