Taxes are stressful and complicated, most especially for small-business owners. Yes, it is not definitely exciting to shell out a great amount of money to give the government. However, failure to pay your taxes on time can cost you a lot. That’s why every business owner, big or small, shouldn’t miss out on tax deductions which could really help you save big time on your taxes. If you are one of them, then you’re on the right page. This article will discuss the 10 incredible tax deductions that small business owners don’t know about.
What is a tax deduction?
Also known as “write-offs”, tax deductions are known to have impacts on how much you pay in taxes. These deductions are reported every time you file your tax papers and then subtracted from your business’ gross revenue, leaving you only your taxable profits, which is the basis on how much tax you owe.
Tax Deductions That Small Business Need to Know About
By lowering your taxable income, your tax liability is also lowered. The more tax deductions you have, the lesser taxes you’ll have to pay the government. This then makes tax deductions important for business owners, most especially for the small ones.
Some of the deductions may be difficult to track, but savings are totally worth the effort and time. Here are the 10 tax deductions that small business owners don’t know about.
1. Mobile Phone Bill
Cell phone bills are definitely on the rise and most business owners do not know that they can actually write this tax deduction off.
Writing your cell phone bills off can be done easily as long as you figure out first how much you use for business and personal purposes. Remember, you don’t just do phone calls. You also use it to do various business-related things such as checking emails, calling and texting clients, as well as uploading your ad posts to your company’s social media platforms.
So, how do you write it off? First, you need to get your deductible portion. Here is the formula:
Cell phone bill x Business usage percentage = Deductible portion
2. Business Mileage
Many business owners are not aware of what business mileage is and how it can impact their taxes. Another reason is that they get overwhelmed by how they are able to record it. Little they know that there are already apps that they can use to track the needed information. The most recommended app is the MileIQ which features Drive Detection which automatically detects when you’re driving to track your travel. It also allows you to choose whether your mileage is for business or personal purposes.
3. Direct Home Office
Every business owner is familiar with indirect home deduction but what they don’t know is that direct home office deductions are also absolutely deductible.
What are direct home office deductions? They are the expenses that are only related to your home office do not apply to the other areas of your personal living area.
4. Home Internet Bills
If you work from home most of the time, you can write off the business percentage of your home internet bill too. Many business owners are not aware of the fact that they can deduct their home internet bill and it doesn’t matter if you own a home office or not.
Just like writing off your mobile phone bill, it is essential to come up with the time percentage of your internet usage for business purposes. Keep in mind that internet usage for video and music streaming is not counted in your business expenses so don’t include them.
To find out your deductible percentage, get the business percentage and multiply it by your home internet bill. Here’s the formula:
Home internet bill x business usage percentage = deductible percentage
5. Travel Expenses
Most small-business owners and their employees travel a lot around the country to do business. This can be costly but the good news is that airline tickets, uber rides, and hotel bookings can be used as deductibles if and only if there is a business reason behind these. Keep the receipts and write down all the important details of your travel expenses.
6. Meals
Meals expenses are just one of the tax deductions that small business owners don’t know about. As business owners, you really have to wine and dine with your clients which we know can be expensive. Don’t worry as you can actually deduct 50% of the costs of business lunchers and dinners. Buying your staff and employees’ food at a company party can also be deducted.
7. Insurance
You need insurance to protect your business regardless of what kind you are in. The good thing is insurance premiums are deductible. You can deduct the cost of your insurance premiums and these include fire and flood insurance and liability insurance. Medical insurance for your staff can also be deducted but it is important for you to find out if whether it is under certain circumstances.
8. Rent
Rent is always increasing and the best way to break it is to make it a deductible. Rent expenses are fully deductible regardless of where it is located.
9. Parking and Toll Fees
Writing off parking and toll fees is similar to writing off your business mileage. Just bear in mind that you can’t write off parking and toll fees if you are parking at your main business location. Just write off those that are incurred elsewhere such as at airports and during business trips.
How do you keep track of your business parking and tolls? Well, you just have to make use of your business card in a meter that is accepting credit cards. You can also download the MileIQ map which lets you save parking and toll costs to any drive so you can track easily.
10. Educational Workshops
Organizing any educational workshops or training related to the industry which your business is in is vital in every company. What’s more beneficial is that these educational expenses are deductible. Conferences, webinars lectures, and reference materials costs can be deducted as well.
Final Thoughts
You can find a number of tax deductions that small business owners don’t know about so you might find it hard to figure out where to begin. You can start by including two or three of these deductions into your tax plan and decide if you can incorporate a few more.
Always keep good, detailed records and make sure to insert your business purpose for every expense you have. These incredible write-offs, if properly done, can help you save big time for your business!