As you prepare to file your small business taxes, it is important to know what tax deductions you can apply to your business. Tax deductions decrease your taxable income, which means more of the money you earn gets to stay in your pocket. Some of the most common small business tax deductions are listed below; read on to learn whether each deduction can be applied to your business’ tax return.
Home Office Tax Deductions
You can write off your home office expenses as a small business tax deduction. You can only deduct costs related to your home office. This space in your home must be used exclusively for business operations, and be the primary place from which you operate your business.
Business Use of a Car
You can deduct the use of your car for any business-related and necessary travel that is not your commute to and from work. You additionally cannot write off as small business tax deductions any parking fees or traffic tickets accrued.
Travel expenses for business-related trips can be written off as small business tax deductions. These costs include airfare and hotel fees. The expenses must be necessary and reasonable, and you cannot write off personal vacations that are unrelated to business.
Employee Payment Expenses
You can deduct employee wages you paid throughout the year, and you can deduct contributions you made to employee benefits.
The IRS allows you to claim employee expenses that are higher than 2% of your adjusted gross income. You will not permitted to deduct these expenses if they are lower than the 2% number.
You can write off any charitable donations you made as small business tax deductions. The charitable donation you write off must be less than 50% of your adjusted gross income. Depending on what property you give and the organization you donate to, the deduction may be limited to 30% of your gross income.
Business Bad Debt
If you sold to a customer on credit and have unsuccessfully tried to collect the money, accounts receivable turn into bad business debts. Business Bad Debts can be small business tax deductions, but you must be able to prove to the IRS that you have taken all reasonable steps to collect the money.
Legal and Professional Fees
You can deduct any legal or professional fees that are necessary and directly related to your business, including accounting fees. If you had to take a customer who refused to pay to court, you could deduct those legal fees. You cannot deduct any personal legal or professional expenses.
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