Small Business Tax Deductions

From LoveToKnow Business

You can utilized many small business tax deductions to help minimize your tax bill. According to the Internal Revenue Service, small business expenses are tax deductible as long as they are “ordinary and necessary.” This includes expenses that are typical to your line of business and directly effect and improve your business model, strategy and function.

What Are Small Business Tax Deductible Expense?

All small business tax deductions are different, and as a small business owner, it is your responsibility to follow the guidelines and requirements related to filing your taxes. For a detailed publication distributed by the IRS, visit Business Expense Table of Contents.

Your small business tax deductions can include any expenditure that goes towards:

Business product costs
Daily business and start up costs
Business employee and client related expenses
Expenses that are part business and part personal

Business services includes any service you utilize to assist you in the day-to-day maintenance and improvement of your operation.

Some examples include:

Shipping expenses
Advertising costs
Telephone services
Designers
Printing services

Banking and funds services include the fees related to start up costs and expenses related to the company's financial accounts. Some examples include:

Banking fees
Credit card fees
Checkbooks
Business Start up Costs

Business Employee and Client Tax Deductions

Besides your day-to-day business expenses, the expenses related to paying and maintaining your business employees and clients are often tax deductible.

Employee expenses are part of your small business tax deductions, and can include all employee payroll and miscellaneous expenses related to you acting as an employer, including:

Employee salaries
Employee bonuses
Employee health benefit
Employee retirement plans

Expenses related to your business clients are also tax deductible, as long as the expense is made to entertain, maintain or appease them. Examples of client business expenses include:

Client gifts (Christmas Gifts, thank you gifts)
Entertaining clients (hotel reservations, business dinners)
Conference expenses (coffee, conference room rentals)

Personal Tax Deductions

As a business owner, you are likely to incur expenses that will qualify as small business tax deductions. These expenses may be personal, business or a combination of the two. It is important to remember that if you are paying for expenses that are for part personal and part business use, you should divide the total cost by the portion of the purchase that is used for business purposes. This portion is the tax deductible amount.

Expenses that are frequently only partially tax deductible include:

Company car (gas, maintenance, payments, insurance)
Travel expenses (hotel, car rentals, food)
Education related to your business (college courses, seminars)
Business literature (magazines, journals, books)
Social security premiums (If you’re self-employed, half of this tax is deductible.)
Philanthropy (charities, community service)

General/Other Tax Deductions

Some of the trickier business tax deductions should be discussed with a financial advisor. Other small business tax deductions can include fractions of specific expenses, partial business and personal expenses, and other related expenses that don’t fall under personal, employee, daily business or client expenses.

These trickier tax issues include:

Taxes related to business
Depreciable assets (discuss with your financial advisor)
Other insurance costs
Retirement payments and plans
Interest costs, business debt amounts
Loss related to theft or property damage

Small Business Tax Deductions Conclusion

It is important to consult a financial advisor when preparing end of the year tax forms for your small business, both to ensure you reduce your tax bill as much as possible and to follow all appropriate tax guidelines. Other tax deduction regulation related to small business expenses do exist. The examples presented above are for reference and general purposes.

Written by Christina Freeman