7 Tax Deductions Small Businesses Can’t Afford to Overlook
Small Business Tax Information
Every small business has many deductions that can be written off on their taxes. There are some common write offs for items like advertising costs and office supplies. There are several common knowledge write off items available for a small business. There is a difference from a personal deduction versus a business deduction. There are 7 tax deductions for a small business that are not so commonly known. These 7 tax deductions really should not be overlooked.
Deductions for Small Business
1. Retirement plan contributions:
There are contributions to some qualified retirement plans that can be deducted. This may include the 401(k) plan. It may even include the Simplified Employee plan (SEP). There are tax laws that govern the amount that may be contributed annually. This would be the contributions on the employees’ behalf.
2. Health insurance premiums:
Every business may deduct the health insurance costs that go out to employees. There have been tax law changes that may allow a self-employed person to also deduct the amounts that cover a spouse. This will also cover the amount paid to cover the dependents too. This is 100 percent deductible.
3. Entertainment and travel: A business can deduct many travel expenses. These include:
– Plane fare
– Hotel lodging
These items may be deducted if these are business-related. 50 percent of the costs of the meals and the entertainment can be deducted if clients or customers are the ones who are being entertained by the business. Good record-keeping will be needed. These can only be deducted if meals and entertainment either follow or precede a business related meeting.
4. Qualified production activities:
This is a special tax provision. This section 199 will allow a business to claim a deduction from qualified production. This is equal to 9 percent of its income. This deduction cannot go above 50 percent of the wages that the company pays. This may include the following:
– Construction owners
5. Section 179 expenses:
The 179 section is a tax provision that will allow the business owner to expense the full cost of a business property that is placed in service during the year. There is a specified maximum amount allowed. The congress may be in the process of reinstating it to a higher allowance. This will speed up the rate in recouping the cost of a business property. This would be through depreciation deductions.
6. Vehicle expenses:
If your business leases or owns a vehicle that is used for travel, then a percentage of the following operating costs can be deducted:
There is a “luxury car rule” that limits the annual depreciation deductions for the business vehicle. There are stern record-keeping requirements that must show that it is used for legitimate business.
7. Home office expenses:
This is a write-off that is for those that qualify. The common ones include some of the household expenses:
– Utility expenses
– A generous depreciation allowance
The office needs to be used as a business facility. It can also be a place in which you meet with clients, patients, and customers. This must be in the normal course of the business.
These are the 7 tax deductions that a small business just cannot afford to overlook. There are small family-owned businesses along with start-ups that might not even be aware that these tax deductions are available to them. There are other deductions such as new equipment deductions. There is even some bad debt deductions. If you slightly wonder if an item can be deducted then ask a professional because you might find that there are many more deductions that are available to the small business.
It will be vital to keep excellent records. There is even a deduction for any legal and professional fees that may have been paid by the business. Every small business must ensure that they have covered all of the available tax deductions. This list of 7 vital deductions that a business just cannot afford to overlook is just the beginning of deductions that are available to the small business.
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