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10 Top Tax Deductions for Small Business Owners

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Megan Black

When tax time comes around this year, know you’re taking advantage of all your qualified deductions for your small business 

Top tax deductions for small business owners

That’s why, as we move closer to tax season, you’re probably searching for ways to either lower your tax bill or get more back in your tax return. 

Did you know that many expenses may count as tax write-offs for your small business? We’ve gathered together some of the top expense deductions you may be eligible for as a small business owner or even a self-employed business owner.  

What is a tax deduction? 

According to Investopedia, the definition of an income tax deduction is “a deduction that lowers a person’s tax liability by lowering his taxable income.” When filing taxes, you ideally would rather receive a tax refund than owe any additional money. You can submit various deductions each tax year to lower the amount you owe back in taxes. 

Top Tax Deductions for Small Business Owners 

As a small business owner, there are many ways you can save, thanks to the “ordinary and necessary” rule. The IRS allows deductions on items considered ordinary for business use, meaning common or expected in your industry or type of business, and necessary in terms of being helpful and appropriate for your business. The IRS website has more information on what qualifies as a business expense and how you can deduct it from taxes. While there are other deductions you can consider and expense, the following are some of the top income tax deductions that are helpful to small business owners. 

1. Home Office

You may have the opportunity to file a home office deduction for expenses related to your home office. Based on the square footage of your space, the IRS allows for deducting $5 for every square foot of your office. These home office expenses can help offset expenses related to mortgage/rent, electricity, and internet. However, your home office must be used regularly and exclusively for business needs. So, if your home office doubles as a guest room, home gym, or storage space, you won’t qualify for this deduction. 

2. Advertising and Marketing

Advertising and marketing are essential business activities. After all, without these efforts, how will anybody know your business exists? The good news is while you are out spreading the word about your business, you’re creating opportunities to expense those efforts.   

Common examples include business cards, direct mail letters, billboard advertising, and online advertising. Anything you are using to market your business, including a website and social media, can likely be expensed. 

3. Office Supplies

Even if you don’t purchase many supplies throughout the year, keep track of those you do. Think about things such as: 

  • Paper 
  • Pens and pencils 
  • Stamps 
  • Envelopes 
  • Post-it notes 

Office supplies can also include more significant purchases, such as computers, smartphones, printers, and software. 

4. Vehicle Use

Are you frequently using your car to complete business travel? Taxpayers who make frequent trips to the post office to ship packages, drive to client meetings, or move merchandise from one location to another, these all count as travel expenses related to your business. 

Luckily, if you use your vehicle for business purposes, there are two ways to claim a deduction: 

  • IRS standard mileage rate 
  • Keep track of all vehicle-related expenses 

Using the standard mileage rate is easiest, as all you have to do is track your miles.  

5. Travel

Even if you work at home, there may be times when you’ll travel to meet clients and prospects or attend conferences. From car expenses to business meals, here are just a few travel-related qualifying expenses: 

  • Rental cars 
  • Airline tickets 
  • Hotels 
  • Dinners with clients 
  • Entertaining colleagues 

Just be sure that you’re deducting expenses related to business trips, not those you take for personal reasons. Implementing a system for organizing all your receipts will help keep this straight and will come in handy in an audit. 

6. Insurance

When operating a business, having insurance is crucial because you want to be protected from any risk that could come your way. The good news is that you can request a deduction for things that keep you, your employees, and your business safe at work. The cost for many health insurance premiums is deductible, and even medical insurance for employees can be deductible expenses under certain circumstances. Even startup costs and retirement plans can be eligible for a deduction.  

7. Debt Interest

Have you already taken out a business loan? Debt, in any form, can be challenging to maintain due to the interest that accumulates over time. Any interest you’re paying – whether it’s a loan, mortgage interest, or credit card debt – may be eligible for a tax credit. Just make sure none of the interest attributes to purchases for personal use.  

8. Rent

Many people don’t love the idea of renting. They feel they are throwing money out the window instead of putting it towards something they own. However, a positive in the renter's column is rental real estate expenses are fully deductible. Whether renting a whole office as your business property or a desk in a co-working space or having the entire building dedicated to your business, save those receipts and use them to get a tax break.  

9. Repairs

Broken toilets, leaky faucets, and other damaged items in your business are unpleasant to deal with and can throw a major wrench in your day. The nice upside of performing or paying for repairs within your small business is that the expense is fully deductible if the repair is ordinary. If you are repairing something that will enhance the value of the building/property, that would be covered through depreciation. 

10. Legal and Professional Fees

Do you work with an accountant or bookkeeper? Fees associated with accountants, CPAs, or legal professionals may be eligible for deductions, depending on the service. For example, if you have somebody review a contract or lease or help with tax preparation, the fees are deductible. 

How to Ensure Your Maximizing Your Tax Refund 

While this is not an all-inclusive list of the small business tax deductions available, it should provide you with a good foundation. When you’re ready to file your taxes, it’s best to reach out to a tax professional, accountant, or bookkeeper. These professionals are prepared to answer your more complex questions and provide specific advice to ensure your business remains compliant. 

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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.