Business Expenses You Didn’t Know are Tax Deductible
Smart businesses are always looking for ways to make the most of their tax deduction eligibility. Some strategies include staying up to date on changes in the tax code such as modified credit for pension plan start-up costs and shifts in net operating rules. Others are simpler, such as meeting your tax deduction deadline for filing and understanding which purchases are tax deductible.
In this article, we will focus on the simple strategy of creating business tax deductions through understanding what can—and cannot—be deducted. Knowing which business purchases can lower your tax bill or increase the amount in your refund can go a long way toward helping your business create better, stronger bottom-line health.
Tax-Deductible Purchases for Your Business
Every organization—large or small—requires certain items to conduct day-to-day business. These items can be standard purchases such as office supplies, or can also include purchases that help you keep the kind of talent that you need to stand out from the competition, such as health insurance premiums. Here are some of the most common purchases businesses overlook when filing tax deductions:
Most businesses carry a company credit card to help manage necessary capital expenditures or take out business loans to begin or expand operations. Fortunately, credit card fees, interest on business loans, payments spent for leasing equipment, and even overdraft charges can all be tax deductible.
When considering income tax deductions, especially in a no-income-tax state, writing off sales taxes can be a huge benefit when filing your taxes. Even if your state has an income tax requirement in place, writing off the sales tax on large purchases can help you retain more of your income than a simple standard deduction. So, save those receipts!
Home Office Expenses
Working from home or in a hybrid work environment is the new normal for many workers in the United States. In fact, nearly three-quarters of US companies already use a “productivity anywhere” work model—or are planning to adopt one in the near future. If you are self-employed or you work from a home office part of the time, you may qualify for a home office tax deduction. You must use your office solely for conducting business and you can use a simple calculation (the IRS’s rate multiplied by your office’s square footage) or a more standard technique that will require a bit more recordkeeping.
In addition to your physical office space, you can also deduct internet and phone charges directly related to the conducting of business, meals during travel or while entertaining clients, and even car expenses related to your business travel.
Gifts to Charities
Many businesses help amplify their social profiles by becoming involved in philanthropic events, either locally, regionally, or even nationally. Sometimes this involves donations of actual goods, while other times it can involve providing hands-on assistance to charities or pro-bono work. Any expenses that are incurred as a result of charitable giving or work can qualify as a charitable tax deduction as long as you keep receipts and good records of your time.
For the self-employed as well as those with limited companies, continuing education and training is essential to stay abreast of changes in your industry. Whether education is sought in order to keep up with professional licensing or qualifications or just to expand you or your team’s knowledge, it can help you qualify for tax benefits.
Whether you offer life insurance to your employees as the director of a limited company or you are self-employed, you can claim some types of life insurance as a tax deduction. You must be sure to take out these policies through your business rather than personally. Rules do vary based on whether you are self-employed or have a limited company, so seek the advice of a qualified tax professional before deciding how to proceed.
Getting the Maximum Deductions Allowed
Running a business is no small endeavor, and keeping your finances in the black can be difficult, especially when you are just starting out. One thing every business should take a closer look at is the amount of money they are paying in taxes—and how to get the maximum allowable deductions.
Ensuring you’re taking advantage of all possible deductions can be difficult, especially since tax codes often change on an annual basis. Not all businesses have the luxury of an in-house accounting department, and not all accountants are well-versed in business tax laws. For that reason, so many businesses are only getting their standard tax deduction—missing out on a number of ways to keep more of the money you make.
At Cukierski & Associates, we have more than 200 years of combined experience helping businesses of all sizes keep more of their hard-earned revenue. Our team participates in frequent professional education opportunities to ensure we are up to date with current tax laws and accounting rules so we can best serve our clients. If you’re ready to take advantage of every tax deduction available to your business, contact us today and let’s get started!
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