April 18th is on its way. Even with the few extra days, filing your taxes can be a daunting task, especially if you started your own small business. Luckily there are a variety of deductions entrepreneurs can take that can help to drastically reduce your tax liability.
When you are a business owner, you can deduct many of the taxes you have already paid. This includes gas taxes for business vehicles, sales taxes for business expenses, and state taxes on business income.
Tax Preparation Fees
You can also deduct the fees associated with preparing and filing your taxes from the previous year. You can deduct these fees regardless of whether you used a self-preparing software application or hired a professional to handle it for you.
If your business provides benefits to your employees, like health or life insurance, you may qualify to deduct these expenses.
If you use your vehicle for business, you can deduct related expenses. You can do this through either the standard mileage deduction of 57.5 cents per mile or by tracking individual expenses for gas, maintenance and other related expenses. Both of these methods require careful documentation of your finances to qualify.
As with vehicle expenses, you can deduct some or all of the costs for your telephone service. If you have a phone line that you use solely for business, you can deduct the full cost. If you use the line for both business and personal calling, you can deduct a portion of your expenses. Again, this requires careful documentation, so keep track of your phone records.
Internet and Other Services
You may deduct your monthly internet cost and other associated costs. These can include software subscriptions, virus and malware protection, and professional reference memberships.
If you conduct some or all of your business from home, you may be able to deduct some of your housing expenses, including electricity bills. The percentage is calculated by determining what portion of your house is dedicated solely to your business and nothing else.
Professional Dues and Subscriptions
If the industry that your business is in requires you to maintain a professional certification, you can deduct the dues for that. This category also includes subscriptions to trade journals and other business publications.
Cost of Goods Sold
Purchasing goods to sell in your business or materials to manufacture the goods you sell can be a massive expense each year. You may be eligible to deduct a portion of these costs for the goods that you have actually sold.
When customers fail to pay their accounts, it can put a strain on your business. In some cases, you can deduct these losses on your taxes. To qualify, you must use the accrual method of accounting.
Depreciation of Business Assets
Over time, business assets lose their value through depreciation. For your taxes, you can take a lump sum deduction in the first year you purchase assets, or you can spread the deductions out over the useful life of the asset.
With so many deductions available to small business owners and entrepreneurs, it really pays to get into the details of your taxes. Self-preparing tax software is a great option for businesses with a tight budget and a small operation, whereas tax professionals are equipped to handle the more complicated returns of larger businesses.