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Are You Maximizing Your Small Business Deductions?

Taxes are complicated. Small business owners know that. And most business owners didn’t start their company in order to become experts in tax law. However, business owners can’t completely ignore their taxes, especially when it comes to the tax deductions you might be eligible for. You don’t want to miss out on opportunities that can minimize your tax burden. It’s important to have a basic understanding of what you can deduct so you can provide the necessary documentation to your accountant when tax time comes around. Here’s a list of some common small business deductions that your business may be able to take.

  • Qualified Business Income: This can be a big one for small business owners. Sole proprietorships, LLCs, S-corps and partnerships can take advantage of this deduction courtesy of the 2018 Tax Cuts and Jobs Act. Business owners can deduct 20% of their income on their taxes. There are limits that apply to high income earners; when your income is over $157,500 for single filers or $315,000 for pass-through entities who file a joint return, this deduction starts to phase out.

  • Use of Personal Vehicle for Business: If you’ve used your vehicle for business purposes (not just for your commute to and from your place of business) with proper record keeping, you can deduct this as an expense. You can choose one of two ways to calculate the deduction. You can track your business mileage and multiply the total by the IRS standard mileage rate (for 2019 the IRS standard mileage rate is 58 cents per mile). Or, you can add up your car depreciation and any money spent on gas, repairs, maintenance, insurance and registration fees to get the deduction amount.

  • Professional Fees: Any fees paid to accountants, attorneys, contractors,or other professionals who are independent contractors are deductible as necessary expenses of your business.

  • Bank Fees & Interest: Bank fees related to non-tax-advantaged investment accounts may be deductible as an investment expense. Most commonly, these deductions will be ATM fees, wire transfer fees, and other fees that maintain your business’s bank account. Credit card interest, annual fees, and late payment fees are also tax deductible.

  • Payment Processing Fees: If you accept credit card payments, the processing fees are deductible.

  • Depreciation: The depreciation of an asset can be a tax deduction that allows taxpayers to recover the cost of property or assets they've purchased and used in their business.

  • Education and Training: This can be in the form of classes, seminars, webinars, and/or workshops that add value to your business and increase your expertise or the skill level of your staff.

  • Taxes: Yes, you can use taxes as a deduction on your federal return. Depending on your business structure, you may be eligible to deduct state and local income taxes. If your business owns real estate you can deduct the property taxes. If you pay an occupational tax, such as a business license, this is also deductible.

This is not meant to be a comprehensive list of the deductions that may be available to your business. Also, as always, diligent record keeping is necessary to be able to claim any deduction. Claiming excessive deductions or expenses can often trigger an audit, so be sure to keep receipts. As always, our professional staff is here to help you, so don’t hesitate to reach out to us with any questions.

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