If you are a small business owner and filing your own taxes, it is important to know the tax deductions you are eligible for! You work hard and keep your business moving forward, the last thing you want is to give your money to the IRS. You want to save as much of your hard earned money as possible!
In this post, we are digging in to tax deductions associated with expenses and fees you incur while operating your small business. We covered the basics of small business tax deductions HERE and tax deductions for employers HERE.
Let’s get started with deductions you can claim for your business expenses and fees!
Car & Truck Expenses – You are allowed to deduct the business use of a vehicle by selecting either the standard mileage Rate or the Actual expense method. The key here is how much do you use the automobile for business? If it is your personal auto used for both personal and business, then we would suggest you take the standard mileage rate. If you use a vehicle entirely for business, we strongly suggest taking actual expenses.
If you take the standard mileage rate, make sure to find the current year’s rate listed on irs.gov. You can only take mileage, not gas, repairs, maintenance, etc. The rate is to be all inclusive.
If you are considering the actual method, then you can deduct all of the expenses associated with the business use of the vehicle. This would include gas, repairs & maintenance, depreciation of the vehicle and so on. We always caution new business owners when taking the actual method because to take it means you have to depreciate the vehicle. If you ever need to pull the vehicle out of the business, it would be a taxable transaction.
A decision will need to be made when you place the automobile in service as you are not allowed to change methods from one year to the next. It is also very important to keep a mileage log regardless of what method you choose.
Interest Expense – Interest on business loans that are used to assist business operations.
For example: interest paid on a SBA loan, business vehicle loan, or credit card interest used for 100% business purposes
Software Expense – Non customized software or annual subscriptions for software use can be deducted.
For example: Quickbooks, Microsoft Office Suite
Internet Expense – The cost you pay to have internet services at your business location. If your business location is at your home, you can still deduct the percentage of business use.
For example: You use your internet 50% personal and 50% business and it runs $1200 a year. You can deduct $600 for the internet.
Merchant Fees – Fees charged to offer electronic payment methods in your business.
For example: Fee charged on your credit card sales
Bank & CC Fees – Charges imposed on your business bank or credit card accounts.
For example: Monthly bank fees, NSF fees, annual credit card fee
Taxes – This is not income taxes, but rather taxes the business is required to pay.
For example: City taxes or property taxes on your business assets.
If you have any questions about tax deductions for your small business, please contact us at firstname.lastname@example.org. Tax season doesn’t have to be stressful or overwhelming, we are here to help!