As a small business owner, understanding the various tax deductions available to you can significantly reduce your tax liability and help you keep more of your hard-earned money. It can often be helpful to consult a tax professional to help you find the deductions that are best for your business.
Tax season is right around the corner and there are many things to consider. The professionals at Cyron & Company are here to help you every step of the way. Our team can help you navigate key tax deductions that every small business owner should be aware of.
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Six Primary Deductions You May Already Know About
1. Home Office, Technology, and Property Deductions
If you use part of your home exclusively for business purposes, you may be eligible for the home office deduction. This deduction allows you to deduct a portion of your home expenses, such as mortgage interest, property taxes, utilities, and repairs, as a business expense. You can even deduct a portion of your cell phone expenses if you use it for business calls, or rent or lease payments for business property, such as office space or a warehouse. Expenses related to office supplies, technology, and equipment are also deductible business expenses.
2. Self-Employment Tax Deduction
Self-employed individuals can deduct the employer portion of their self-employment tax, which is 50% of the total self-employment tax paid. This deduction can help reduce your taxable income. As for tax deductions every small business owner should know about, this one is very helpful.
3. Depreciation Deduction (Section 179)
The Section 179 deduction allows small business owners to deduct the cost of qualifying property, such as equipment, machinery, and software, in the year it is placed in service, rather than depreciating it over several years
4. Vehicle Tax Deduction
If you have a vehicle for business purposes, one of the tax deductions ever small business owner should know about is the fact that you can deduct the expenses related to its use, such as mileage, gas, maintenance, and insurance. Alternatively, you can deduct the actual expenses of operating the vehicle or use the standard mileage rate.
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5. Travel Expense Deduction
Along with the vehicle tax deduction, you can also deduct business-related travel expenses, such as airfare, hotel accommodations, meals, and transportation. It’s important to keep detailed records of your travel expenses to substantiate your deductions.
6. Business Meals Deduction
You can deduct 50% of the cost of meals associated with conducting business, such as meals with clients, potential clients, or employees. This deduction can help reduce your taxable income while fostering business relationships.
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Employee Tax Deductions You Should Consider
- Hiring Your Children: If you hire your children to work in your business, you can deduct their wages as a business expense. This not only reduces your taxable income but also provides a valuable learning experience for your children.
- Employee Salaries and Contract Labor: Wages paid to employees and independent contractors are deductible business expenses. This deduction includes salaries, wages, bonuses, and commissions.
- Employee Benefit Programs: Contributions to employee benefit programs, such as health insurance, retirement plans, and other fringe benefits, are deductible expenses. These deductions can help attract and retain talented employees while reducing your tax liability.
Health and Retirement Deductions
- 401(k) Contributions: Contributions made to a 401(k) retirement plan for yourself and your employees are deductible business expenses. This deduction helps you save for retirement while reducing your taxable income.
- Health Savings Account (HSA): Contributions to a Health Savings Account (HSA) are deductible business expenses. An HSA allows you to save for medical expenses while enjoying tax benefits.
- Health Insurance Premiums: Health insurance premiums paid for yourself, your spouse, and your dependents are deductible business expenses. This deduction helps you manage healthcare costs while reducing your taxable income.
Additional Tax Deductions Every Small Business Owner Should Know About
Business Insurance Deduction
Premiums paid for business insurance, such as liability insurance, property insurance, and workers’ compensation insurance, are deductible business expenses. This deduction helps protect your business while reducing your tax liability.
Advertising Expenses
Expenses related to advertising and marketing, such as print ads, online ads, and promotional materials, are deductible business expenses. These deductions help you attract customers while reducing your taxable income.
Education Expenses
Expenses related to education and training, such as workshops, seminars, and professional development courses, are deductible business expenses. These deductions help you and your employees stay updated with industry trends while reducing your tax liability.
Legal and Professional Service Fees
Fees paid to attorneys, accountants, and other professionals for services related to your business are deductible business expenses. These deductions help you manage your business operations while reducing your tax liability.
Bank Fees
Fees paid to banks for business-related services, such as account maintenance and transaction fees, are deductible business expenses. These deductions help you manage your business operations while reducing your tax liability.
Merchant Processing Fees
Fees paid to payment processors for processing credit card transactions are deductible business expenses. These deductions help you manage your business operations while reducing your tax liability.
Charitable Contributions (Sponsorships)
Donations made to charitable organizations and sponsorships are deductible business expenses. These deductions help you support your community while reducing your tax liability.
Tax Preparation Fees
Fees paid to tax professionals for preparing and filing your business tax returns are deductible business expenses. These deductions help you manage your business operations while reducing your tax liability.
Everything Else (Section 162 Expenses)
Other ordinary and necessary business expenses, such as office supplies, travel expenses, and employee training, are deductible business expenses. These deductions help you manage your business operations while reducing your tax liability.
By taking advantage of these tax deductions, small business owners can significantly reduce their tax liability and keep more of their hard-earned money. It’s always a good idea to consult with a tax professional to ensure you’re maximizing your deductions and staying compliant with tax laws.
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Cyron & Company
Cyron & Company is a CPA firm based in Kennett Square, PA, offering comprehensive accounting and tax services for small to mid-sized businesses and individuals. Our services include outsourced accounting and CFO solutions, tax planning and preparation, financial statement reviews, business startup consulting, and QuickBooks Online training. The firm emphasizes using cutting-edge digital tools to simplify financial management, helping clients make informed decisions. With over 20 years of experience, we provide customized financial guidance to help businesses succeed.
