Top Tax Deductions for Small Business Owners
Running a small business or working as a freelancer comes with many challenges, but keeping track of deductible expenses throughout the year can help ease the strain at tax time. By maintaining well-organized financial records, you can maximize deductions, reduce your taxable income, and keep more of your hard-earned money.
At Apex Accounting & Consulting, we help businesses stay on top of their bookkeeping, so they’re prepared when it’s time to file. While your tax professional can offer guidance on specific deductions, here are
10 common expenses that small business owners should track throughout the year:
1. Home Office Deduction
If you work from home, you may be eligible for a home office deduction. The IRS allows you to deduct expenses related to the portion of your home that is used exclusively for business. This can include rent, mortgage interest, utilities, and insurance. Keeping accurate records of your workspace expenses ensures that your tax professional has the information needed to determine your eligibility.
2. Business Equipment & Supplies
Any equipment or supplies necessary for your business, such as computers, printers, office furniture, and software, can be deducted. If the cost is substantial, you may be able to depreciate it over time rather than deducting it all at once. A well-maintained bookkeeping system makes it easier to track these purchases and discuss deduction options with your CPA.
3. Internet & Phone Bills
If you use the internet and phone for business purposes, a portion of these expenses can be deducted. A dedicated business phone line is fully deductible, while personal lines used for business can be deducted based on the percentage of business use. Proper recordkeeping helps ensure these expenses are accurately accounted for.
4. Professional Services & Education
Hiring bookkeepers, accountants, or legal advisors to help manage your business can be a deductible expense. Additionally, any courses, certifications, or workshops that improve your professional skills and benefit your business can also qualify for deductions with proper record keeping.
5. Marketing & Advertising
Expenses related to promoting your business, including website development, online ads, business cards, and social media promotions, are fully deductible. A well-maintained bookkeeping system ensures that these expenses are categorized correctly and easy to access when preparing for tax season.
6. Health Insurance Premiums
If you’re self-employed and pay for your own health insurance, you may be able to deduct your premiums for medical, dental, and long-term care insurance. While a tax professional can determine eligibility, keeping clear records of these payments throughout the year simplifies the process.
7. Travel & Business Meals
Business-related travel, including airfare, lodging, car rentals, and meals, can be deducted. Meals must be directly related to your business and are typically deductible at 50%. Consistently tracking such expenses is the key to deductions.
8. Vehicle Expenses
If you use your car for business purposes, you can deduct mileage, fuel, maintenance, insurance, and even depreciation. The IRS provides a standard mileage rate, or you can track actual expenses and deduct the business-use portion. Having organized records makes it easier to calculate and substantiate these deductions.
9. Retirement Contributions
Contributing to a SEP IRA, Solo 401(k), or SIMPLE IRA can help lower your taxable income while building your retirement savings. Maintaining up-to-date financial records ensures you have the necessary information when planning for retirement.
10. Business Insurance
Policies such as general liability, professional liability, or errors and omissions insurance are fully deductible business expenses. Accurate bookkeeping ensures that these expenses are properly recorded and available when needed.
Maximizing Tax Deductions
While taking advantage of deductions can benefit your business, maintaining accurate and up-to-date financial records is key to ensuring a smooth tax filing process.
At Apex Accounting & Consulting, we specialize in keeping your books in order year-round and work closely with your tax professional to help you maximize deductions.
Need help keeping on top of your business finances? Reach out today to learn more on how we can support your business’s financial health and long-term success.