Common Tax Deductions for Small Businesses
Small business owners often prefer to focus on their expertise at providing high-quality goods and services, leaving their taxes to be filed hurriedly in the midst of tax season. Unfortunately, neglecting your taxes can cause you to miss out on easy to leverage deductions and pay more of your hard-earned profits to the government.
Our guide to common tax deductions for small businesses can help you save money this tax season.
Expense vs. Depreciate
To take advantage of a tax deduction, you can expense or depreciate a deductible cost when filing your taxes. Expensing allows you to regain the full value of the tax in a single season. This is normally preferable to depreciation, where you’ll regain the expense over the course of often seven years.
Section 179 of the 2020 tax code allows you to expense up to $250,000 worth of equipment. You must decide to expense a business-related purchase the year you purchase it.
Common Items for Small Businesses to Expense
Small businesses can write off office supplies used within the year. From pens, paper, and stamps to specialty equipment, business-related expenses can lower your taxable income. You can choose to expense or depreciate property like chairs or software, but neither can be custom made.
Deductions from the Physical Space
Where you conduct your business has a huge impact on your business, and it can also have an impact on your end-of-year taxes. ADA tax credits can help you save money when you purchase something to make your firm more accessible to disabled people.
You also might be able to find tax deductions in the mortgage interest on the building that houses your business. If you rent a building or equipment, you may also be eligible for tax deductions. Your utilities will also count as deductible expenses, so document how much you pay for climate control, water, and electricity each month.
Bettering Yourself and Employees
If you spend money to better yourself and your employees, you should be eligible for tax deductions. Even employee or client entertainment, including business meals and staff picnics, can be expensed as long as they have a clear business-related purpose.
Money that you spend furthering your education or improving your business-related skill can also be applied toward tax deductions. If you attend lectures, subscribe to a journal dedicated to your profession, or take job-specific training courses, document your expenses, and apply them next tax season.
Tips for your Taxes
Getting a big tax refund check in May is dependent on doing the relevant clerical work throughout the year. Document all your business-related expenses so you can apply them when it matters.
If you’re expecting a refund, it’s in your best interest to file your taxes as early as possible.
Appeal to the Experts
Many optometrists find taxes complicated and arduous. A local tax accountant can set your mind at ease by performing the necessary tax work correctly and sparing you the headache.
At Caro & Associates, we’re committed to providing the year-round support your firm needs to mitigate your tax load.
Contact us at (206) 497-0671 or info@caroandassociates.com to learn how one of our experienced tax accountants could help your business.