A good rule of thumb for anyone is to make the most of your potential deductions when filing taxes, and this rule applies doubly to businesses. Tax deductions change from year to year; however, there are always plenty of potential deductions available to small businesses if you know where to look. Here are some of the most beneficial tax write-offs for your business.
1. Promotional Costs
You should always deduct all of your expenses involved in promoting your business to the public. From newspaper ads to website design and upkeep, these are all out-of-pocket expenses designated to drum up potential business without any tangible guaranteed return on investment. Much like business startup costs, this money represents a pre-sale, personal investment back into the market that mitigates some potential earnings and is thus tax-deductible.
2. Company Car
When you own and operate a small business, your family car is your company car. Even if you have a small commute, you should include all auto expenses when filing your business taxes. Car repairs, vehicle value depreciation, fuel costs, registration fees, new tire costs, and parking fees are all applicable for potential deductions. Even if your tax professional rejects a portion of these expenses, you can still cut costs on the front end by prioritizing necessary repairs over aesthetic ones and looking for quality cheap car insurance deals.
Some portions of your utility costs can also be claimed on taxes. Water and electricity bills, as well as phone and internet costs, can be written off as partial deductions since they are part of the unavoidable operational costs that reduce your potential earnings.
4. Charitable Donations
Giving to charity is not only good for your public relationships but also your standing with the IRS. Charitable contributions from a business standpoint serve as a placeholder for taxed income. In other words, a portion of what you give to charity represents a voluntary return of taxable income back to the community. As a result, businesses can claim charitable giving up to a varying percentage of their aggregate net income.
5. Office Expenses
Besides utilities, every business has some form of office expenses. This applies to both home offices and professional buildings. The type of expenses can vary but may include pens, paper, printer cartridges, computer hardware, mobile devices, and digital services. Any office expense directly related to the daily operation of your business may be eligible.
6. Mortgage Interest
Many unavoidable expenses that directly affect your business’s ability to earn income are applicable for tax write-offs. Owning real estate often comes with the added financial burden of paying off mortgage loans over long periods of time. The interest you pay on your mortgage is an acceptable deductible financial burden you should always include when filing taxes.
7. Net Losses
No business owner sets out to lose money, but sometimes a business faces net losses over the course of the fiscal year. Fortunately, you are currently able to apply your net losses as a tax deduction. Tax laws change frequently, so this may not always be a possibility. For example, under the 2021 tax laws, net operating losses can be offset all of your income from the years 2018-2020, eliminating all tax burdens for businesses with net losses for those years.
8. Child Care
The cost of childcare is tax-deductible, which would include daycare and babysitter fees. For a business owner, if you pay for your employees’ childcare expenses you can claim a portion of this expense as a business write-off. This tax deduction also applies for reimbursed care given to disabled and elderly family members of employees as well.
Naturally, since tax laws change frequently, you need to keep an eye on changes that affect you and your business. Many of these deductibles are likely to remain in effect to some extent, making them all the more important for your business to get into the habit of claiming on your taxes. The key to your business tax filings is to maximize your potential for deductions.