Essential Tax Deductions for Small Business Owners in the US

When you start a small business in the US, you will obviously feel overwhelmed by taxes. This is especially when your startup will be in states with high taxation rates. However, the Internal Revenue Service (IRS) will offer some relief through deductions on business expenses to help lower your tax bill. You may have a chance to get a good return if you keep good records throughout the year and your business expenses are ordinary and necessary. Most notably, there are countless deductions to choose from when filing for taxes. If you are not sure of the deductions for small businesses in the US, you should read on.

Charitable Contributions

Based on the US tax policy, charitable giving not only benefits the receiver but also the giver. The charitable contributions are in form of cash or property. Regardless of the form of donations, they are deductions to be made from your taxes. Even so, there are limitations to making these deductions. For instance, you can only donate up to 50% of your adjusted gross income for cash contributions. If you are donating property, it should not exceed 30% of your adjusted gross income.

Car and Truck Expenses

This deduction is essential, especially when your work requires you to be a road warrior or take the occasional road trip. If the vehicle is exclusively for business, you can deduct car-related expenses that build up during the tax year. It is imperative to note that you should not make any deduction if you use your vehicle for personal purposes. Because you can only account for your business-related usage, it is essential to document everything. Currently, the IRS is known to offer two ways to account for your car-related expenses. These are the vehicle’s total mileage and actual expenses such as repairs, gas, and insurance. Recording vehicle mileage and logging actual expenses should be a crucial undertaking by every small business.

Office Supplies

Regardless of the office supplies you use, you can fully claim a tax deduction on those costs. According to the IRS, office supplies include more than just paper clips, sticky note, printing papers, and mouse pads. During the formation of a small business, you can also claim costly purchases less than $2,500. This includes items such as laptops, software, and other electronics for office use. It would be best to factor in depreciating the office supplies if they are over $2,500 to get a tax deduction.

Phone Calls

A small business owner in the US can deduct the cost of calls you make for your business. Presently, it is inevitable that everyone has become a heavy user of phone calls as a primary method of communication. You can claim a tax deduction on phone expenses. Therefore, you must keep detailed records of which calls were business if you take personal and business calls on the same phone. This will help avoid confusion when calculating the tax deduction you should get when filing tax returns.

Legal and Professional Services

For many business owners, paying lawyers or accountants may be an annoying expense. However, you can save big when the tax season comes around. Lawyer fees or fees for accountants, brokers, and appraisers are tax deductible. This includes using the services of Mount Bonnell Advisors.

Retirement Savings

For a small business owner in the US, you can still save for retirement even when you are self-employed. There are several retirement plans available including the Simplified Employee Pension, or HR10 pension also known as Keogh plan. If you put money into a retirement plan, you can get a tax deduction. In addition, you can claim a tax deduction for the contributions you make to employee retirement plans.

Advertising Expenses

Nowadays, there are various methods of advertising available to the world of business. Modern advertising includes more than TV, radio, and print. For instance, the cost of hiring an expert to create your logo is an advertising expense. Moreover, paying to boost your social media spots, like in Facebook posts, is also an advertising expense. All these advertising expenses are tax deductible. However, your expenses must fall within reason. On a light note, do not be afraid to get creative!

Home Office Deduction

This deduction is mainly for people who opt to start their small businesses from a home office. However, one should exclusively use the room for work and nothing else. Once you figure out what portion of your home to use for business operations, you can deduct that amount off your total home expenses. This may include, rent, utilities, insurance, and interest.

If you are not sure about the tax deceptions available for small businesses in the US, you should contact us for help. Mount Bonnell Advisors serves the accounting needs of start-ups, entrepreneurs, and small businesses by providing extraordinary service at a great price.