Tax Deductions for your Small Business

Tax Deductions for your Small Business

For a small business, claiming deductions can help decrease the amount of taxes paid out each year. Listed below are a few expenses entrepreneurs can take advantage of when it’s time to file.

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Auto Expenses

 

Whether your company owns a vehicle or you use your personal car for business purposes, you can deduct either the mileage or the costs associated with driving for the enterprise. To deduct mileage, keep a careful record of business-related miles, such as those driven to meet with clients or to visit a temporary office location. Mileage accrued during a regular commute, however, cannot be claimed as a tax deduction. At the end of the year, total up the miles and multiply that number by the national standard mileage rate.

 

Sometimes it’s more cost-effective to deduct all expenses associated with operating a vehicle for business. Deductible expenses include insurance, lease payments, depreciation licenses, gasoline, tires, oil changes, repair costs, and fees for parking garages and vehicle registration.

Professional and Legal Fee Deductions

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Deducting the fees your business pays lawyers and other professionals can also save you money. Even the work your tax professional does to prepare your taxes is deductible. You can only deduct services provided for the current tax year. If a professional’s work pertains to future years as well, the deductions must be spread across all tax years in question.

 

Travel, Entertainment, and Gifts

 

Lesser-known deductions include those expenses related to business travel and entertainment. While business-related hotel stays and the cost of travel are 100% deductible, only 50% of meal costs can be claimed.

 

The IRS also rewards your business’s generosity with annual tax deductions. You can deduct the full cost of gifts given directly to employees or clients (up to $25 per person) each year.

 

Keep Thorough Records

 

The key to effectively reporting these expenses is thorough documentation and record keeping. You must be able to provide evidence of purchases or expenses through cancelled checks or itemized receipts or bills that indicate dates and locations.

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