A smart business owner like you knows you need to watch every expense, including your tax bill.
While you can’t avoid taxes altogether (unless you want to risk going to jail) you can do your best to pay as little in taxes as possible by taking every legal deduction you’re entitled to.
Here are 7 small business tax deductions that even the most savvy entrepreneurs sometimes forget to take:
Note: I’m not an accountant. You should seek advice from a tax professional to determine if you qualify for any of these deductions.
The home office deduction is for homeowners and renters who use part of their home for business purposes. It could be a room in your house or even just a part of a room.
To qualify for the deduction, you will need to meet certain criteria. For example, your home office needs to be your principal place of business and you must use it regularly and exclusively for business purposes.
If you meet the qualifications you can write off a portion of your real estate taxes, mortgage interest, rent, electricity, and other expenses.
Paper clips, pens, staples, file folders, printer ink and paper, etc. Any office supplies you buy to use for your business are deductible. So save those receipts because it can really add up over the course of a year.
Furniture and Equipment
Of course it takes more than just pens and paper clips to have a home office. You probably have a desk, a chair, a filing cabinet, bookshelves, a computer, a printer, and other equipment needed to run your business. The good news is all that stuff is tax deductible.
You actually have two deduction methods to choose from for furniture and equipment. You can use the depreciation method which allows you to spread your deduction out over seven years, or you can take the full deduction in just one year.
To deduct the full cost in one year you’ll use the Section 179 deduction (that sexy name comes from the part of the tax code where the law appears).
Which method should you use? It depends…you’ll need to decide for yourself when your business will benefit from these deductions the most.
Depending on the nature of your business, there may be various trade journals and magazines that you subscribe to in order to stay up to date on industry trends. These subscriptions are fully deductible.
The IRS is going to assume that you have a phone in your home so you can’t deduct your entire telephone bill. But you can deduct the cost of any business calls made from home.
You’ll need to keep track of which calls were for business purposes. You can do so by reviewing your monthly bill and circling any business calls. Just total up the cost of all the circled calls and that’s the amount you can deduct.
If you have a second telephone line installed and use it strictly for business purposes, you can deduct the full cost.
If you use your car for business reasons you can get a nice deduction on your tax bill. You’ll have to track your mileage carefully so it’s helpful to keep a notebook in your car to jot down miles driven, tolls, and parking costs.
At the end of the year you can add up your mileage and multiply by 56 cents to calculate your deduction for 2014. Or you can calculate what percentage of your overall driving was for business use and then deduct that portion of your actual expenses.
If you do a lot of driving for your business this deduction can quickly add up. A friend of mine is a real estate agent and spends most weekends driving buyers around to look at various houses. All those miles are deductible since they’re a legitimate business expense.
Travel, Entertainment, and Gifts
Traveling out of town for a conference or trade show? Your transportation costs are 100 percent deductible, so keep track of your expenses for those planes, trains, and automobiles. You can also deduct 50 percent of the cost of any meals you eat while traveling.
If you take a potential client out for dinner to try to woo their business you can deduct 50 percent of the meal. Gifts are 100 percent deductible up to $25 per person, so if you send your clients a calendar or coffee mug each Christmas you can deduct the full cost of those gifts.
Don’t let Uncle Sam take any more of your money than necessary. Make sure you grab all the small business tax deductions you’re entitled to and keep more money in your pocket.
image credit: lendingmemo