As a small-business owner, you know that every penny
counts. One of the ways you can save money and maximize your profits is by
taking advantage of tax deductions. Tax deductions are expenses that can be
removed from your taxable income, significantly reducing your overall tax bill.
However, many small-business owners are unaware of the
various deductions available to them. These tax deductions save you money that
you can utilize for the expansion of your business. This article will explore
five strategies for maximizing tax deductions for small-business owners.
1. Keep Accurate Records
The first step in maximizing your tax deductions is to keep
accurate records of all your business expenses. Business records include
receipts, invoices, bank statements, and other relevant documents. Keep track
of your yearly expenses to identify tax-deductible business expenses and
maximize your deductible amount. Involve your bookkeeper or tax expert in this
process to ensure you don't miss a thing.
2. Take Advantage of Section 179
Section 179 of the IRS tax code gives leeway for businesses
to deduct the total cost of qualifying equipment and software acquired during
the tax year. This tax code means you can subtract the entire equipment cost from
your taxable income to a certain maximum each tax year. The equipment must be
purchased and put into service during the tax year.
This deduction is particularly useful to small businesses
that purchase expensive equipment such as computers, vehicles, and machinery as
they start to establish themselves.
3. Deduct Business Mileage
If you use your vehicle for business purposes, you can
deduct the mileage on your tax return. To qualify for this deduction, you must
keep records of your business miles, including the date, destination, and
purpose of every trip. You can also deduct other expenses related to your
vehicle, such as gas, parking fees, toll charges, oil changes, and repairs when
you prefer to use the actual expense method instead of the standard mileage
rate.
4. Home Office Deduction
You may be eligible for a home office deduction if you
operate your business from home. This deduction allows you to deduct a portion
of your home expenses, such as rent, mortgage interest, utilities, and insurance,
based on the percentage of your home used for business purposes.
To qualify for the home office deduction, you must have a
designated area of your home that is used exclusively for business purposes.
This area can be a separate room or a portion of a room in your home. The
designated area is eligible for home office deductions, provided it is used
regularly and exclusively for business activities.
5. Deduct Business Expenses
Small-business owners can deduct several business expenses,
including office supplies, travel expenses, advertising, and professional
services. The business expense must be necessary and ordinary for your business
to qualify for these deductions.
Business expenses like meals and entertainment are only
partially deductible. For example, you may only be able to deduct half the cost
of business meals and entertainment. Professional services to the business are
tax deductible. Legal services, tax consultancy, and business consultancy are
tax deductible in the year they were incurred.
Work closely with the expert filling your taxes. Present
all the business documents to ensure a smooth and productive process. When you
involve an expert, you stand to benefit from their rich expertise, which is
instrumental in maximizing your tax deductions.
Avoid filing your business taxes yourself. We at Quality
Bookkeeping Services, Inc., are experts in accounting, payroll, and tax
services. Engage us for more strategies on how to maximize your tax deductions.
We don't just provide services, we deliver value. Contact us
today to book
an appointment.
