If you’re a small business owner it’s important to understand tax deductions. Read on to learn more about the ways in which you can get your ducks in a row before tax time rolls around, and to keep more money in your pocket.
1) Work from home? Deduct household expenses.
Whether you work from home full-time or part-time, you can deduct a portion of your everyday living expenses on your taxes. The key here is to have a dedicated section of your home that functions as an office. Unfortunately, if you work at the kitchen table or have a small desk in the guest room, you won’t be able to count either of these as a “home office.” But a spare room dedicated solely to your business will do the trick. From there, you may be able to deduct a percentage of your mortgage interest, insurance, utility bills, and even home repairs.
2) You can deduct auto expenses too.
If you use your car in your line of work, whether directly or to drive to meetings, then car expenses can also make their way to your tax deductions. There are two ways to do this. Deducting actual car expenses, such as gas, repairs, and insurance, will require you to calculate what percentage of your vehicle usage was for your business, and work out the deduction amounts from there. It may be simpler to use the standard mileage rate, where you multiply the number of miles you’ve driven for business by the standard mileage rate for the year. This can be found on the IRS website.
3) Invest in your future, tax free.
Whether you’re the sole employee of your business or you’ve got other folks working for you, contributing to a retirement account or accounts is a great way to lower your taxable income. Any contributions to a retirement plan are tax free. And that’s not all. Assets in a retirement plan grow tax-free. Taxes come due when distributions are taken from the fund later on down the line.
4) Don’t forget about business lunches.
50 percent of business-related meal costs can be deducted. People’s minds go immediately to lunch meetings with clients or potential clients. But don’t forget about special lunches for employees, such as a pizza Friday or birthday celebration. Fair warning: Folks tend to go overboard here. Try to view company funds in the same way you do personal funds. Stay within reasonable bounds—avoid lobster Fridays for instance—and these deductions offer a great way to save money and have a good time doing it.
5) Get some help.
You know who might know more about small business tax preparation? An experienced tax professional! We’ve got a number of talented and smart folks here at Steiner Business Solutions that can help you get your tax strategies in order. We can provide valuable insight that comes with our years of experience working with hundreds of small business owners . Especially when you’re just starting out, the guidance provided by a knowledgeable professional can be invaluable.
Contact us today to help put together your tax reduction strategy.