Owning a small business is no easy feat. It requires determination, dedication, and a bit of blood, sweat, and tears to run smoothly. Fortunately, when it comes time to file taxes, there are several ways to strategically maximize tax write-offs for your business to make the most of your professional ventures. Here are just a few notes we have to get you started:
Before we jump into the specific tax write-offs for your business, it’s important to sort your interest expenses into the following categories:
• Business interest – Interest expenses that directly apply to supporting your business (fully deductible)
• Passive interest – These interests define activities that you do not fully materially participate in, i.e., you do not continually work on these activities (only deductible if you have enough passive income)
• Investment interest – Like it sounds, this refers to the interest on money borrowed for taxable investments (only deductible if you have enough investment income)
• Personal interest – Interest expenses from personal loans, e.g., home loans, college loans, etc.
Once all interest expenses are categorized, it will be easier to determine the tax write-offs for which you and your business are eligible. There are numerous business expenses that translate into a tax write-off, so be sure to thoroughly discuss your business’s finances with your CPA when filing taxes. Get a head start by organizing receipts for the following expenses that are always or often deductible:
Insurance and Business Affiliations.
Business insurance – which also includes malpractice coverage, continuation insurance, and machinery insurance – is tax deductible. Business memberships, certificates, training, and affiliations also fall under this category.
Workspace and Related Utilities.
The cost of rent for your business facility, as well as the utility costs it takes to run the facility, is all tax deductible. Although slightly different rules apply for home offices, there are still many write-offs available for at-home workers.
Technology and Supplies.
The costs of larger technology items, such as computers and phones, are tax deductible, but don’t forget about the smaller items as well, e.g., desk supplies, cleaning supplies, etc.
Business Travel Costs.
If your business requires you to travel, these expenses are likely eligible for a write-off. While entertainment and food costs do not qualify for a full deduction, smaller travel costs like mileage and parking fees may be deducted.
Many businesses give back to the community through donations to nonprofits and local causes. Always save these organizations’ tax ID numbers to be eligible for the associated tax write-offs.
Maintenance and Repairs.
Making repairs to your business property, including labor and materials, can be written off if they are directly associated with the location (home office?) you use to earn your income.
Any loan pertaining to your business is fully tax deductible. Talk to your CPA to make sure your loans follow IRS rules.
At Yeater & Associates, CPAs, we can delve into your business’s financial situation and expenses to help you maximize all pertinent tax write-offs for your business. Don’t go at it alone, the pros are here to get it done right.