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Small Business Tax Deduction Checklist February 3, 2021

Posted by bradstreetblogger in : Business consulting, Deductions, Depreciation options, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Rules, Tax Tip, Taxes , trackback

We receive a ton of questions regarding what is tax deductible. If the expense is associated with your business then it is most likely deductible. As a side note, many people are unaware that upon starting a new business, your personal assets that are now used in the new business may be deducted as an expense or as depreciation expense. Those personal assets have now been converted to from personal use to business use. They may be deducted at their fair market value at the time they were placed into service. Fair market value is typically defined as “garage sale” value. These assets may include computers, faxes, phones, copiers, printers, desks, chairs, tables, etc. The article that follows drills down further with a list of some common business tax deductions.

The not-so-good news? Every business needs to file taxes. The great news? There are many expenses you can apply to your income to help alleviate your tax burden. These deductions will reduce your profits, meaning that you will pay lower overall taxes. While the IRS does not specifically list what you can claim, they do state that if a cost you’ve incurred is “ordinary and necessary” to running your business, then you can deduct it.

We’ve created a checklist below of most of the deductions you can claim for your small business. As always, check with your accountant or tax preparer if you have any questions or need clarification. Note that some of the expenses listed below will need to be “depreciated” or expensed over several years. Speak to your tax preparer for more information.

Rent, Mortgage, and Utility Tax Deductions

These tax deductions include costs associated with renting a building for business, using part of your home as an office, utility bills, and other factors. 

Rent and Mortgage Expenses

Utility Bills Expenses

You cannot claim a telephone landline unless it is specifically dedicated to your business. You can claim a percentage of your mobile phone bill depending on how much you use your mobile phone for business.

Office Expenses and Tax Deductions

You can take additional deductions on money you spend for your business office.

Office Furniture Expenses

Office Computer Expenses

Office Software Expenses

Office Equipment Expenses

Office Supplies and Sundries Expenses

Office Maintenance and Repairs Expenses

Employee Expenses and Tax Deductions

If you pay a salary to employees, then you can deduct some of those costs from your business revenue. Employee expenses and taxes can be complex, so we recommend speaking to an accountant or tax preparer to understand what you can deduct.

Freelance, Contractor, and Professional Tax Deductions

You can claim costs for professional services like tax preparation or legal fees, and for paying freelancers or other contractors to complete work for your business.

Accountancy Expenses

Legal Expenses

Freelance and Contractor Expenses

Car and Vehicle Tax Deductions

If you use a vehicle in part or exclusively for your business, you can deduct those costs. You can either track everything individually, or use the IRS mileage rates.

Advertising and Marketing Tax Deductions

You can deduct any money you spend on promoting your business.

Travel and Accommodation Tax Deductions

If you travel or stay away from home for business, those costs are deductible.

Loan Interest and Bad Debt Tax Deductions

If you have taken out loans for your business, you can deduct the interest.

Education and Training Tax Deductions

When you provide training to yourself or your staff, those costs can be deducted.

Payment and Bank Fee Tax Deductions

Your bank is likely to charge you for business services, and you’ll also pay a fee for accepting charge, credit, or debit cards.

Insurance Tax Deductions

You can deduct insurance premiums incurred by your business:

Qualified Business Income Tax Deductions

Depending on the type of business you run, and subject to certain limits, you can claim up to 20% of your profits as a tax deduction. Speak to your accountant about this, as it can be a complex area.

Miscellaneous Tax Deductions

Depending on the type of business you run, there are potentially dozens of other areas you can expense. 

We hope you’ve found this small business tax deductions checklist useful. This list is not exhaustive, but it will give you a good starting point for your expenses. As always, talk to a professional tax preparer or accountant about your unique tax circumstances to ensure you’re claiming expenses correctly.

Credit given to Lisa Xiong and published on March 6, 2020.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author, Mark Bradstreet, CPA

–until next week.

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