Business Owner Taxes

Are You Taking These Deductions as a Small Business Owner?

Let’s be honest, working for yourself is amazing! You have the power to control your own destiny by doing the work you love. What can be better than that?

Small business owners are not scared of a little (or a lot) of responsibility, so come tax time they will be sifting through receipts and records to find ways they can deduct money from their tax bill. These deductible business expenses help many entrepreneurs with the cost of running their businesses.

Most people are aware that basic business expenditures can be written off, but what about some of the more unique deductions? I have put together a list of some of the most unusual, but incredibly helpful deductions for small business owners. Hopefully, you will be able to use these tricks to help your tax bill this year!

1. Home Office

Many entrepreneurs have a space in their home dedicated to their business. That small room you fixed up with your desk, books, and a handful of inspirational plaques can be deducted from your taxes. It is important that there is a dedicated space in your home for the IRS to consider it a home office, that means that all your writing from your kitchen table can’t be deducted. But if you move that coveted writing table into your home office, it can be deducted. Any furniture expense like a new desk, chair, shelf, etc. can be deducted from your taxes. It is also important to know that if you rent a space such as a desk from WeWork or a storefront, that rent cost is fully deductible.

Your deduction is calculated by the amount of square footage being used as your home office. By dividing the total number of square footage of your house from that being used as the home office, you will be left with the percent of direct and indirect expenses that can be deducted. Those expenses include:

  • Rent
  • Utilities
  • Insurance
  • Repairs
  • Internet

You can leave the light on for yourself because you can deduct it from your taxes! When you work out of your home you will also be eligible to deduct basic expenses you might not otherwise consider:

  • Coffee
  • Snacks
  • Toilet paper
  • Hand soap
  • Sanitizer
  • Cleaning products

These are items that traditional office spaces would have, making them tax deductible.

2. Office Supplies

Remember that trip to Staples you made last week for more post-its, envelopes, and paper clips? Yep, you can deduct that!

The IRS allows small business owners to deduct supplies that they need to conduct their business as long as the purchase is made in the same tax-year and the receipts are kept. Any supplies from printers to paper to postage, you can write off your tax bill.

3. Professional Services/Contractor Labor

Being a small business, you may not have an in-house accountant but that doesn’t mean you can’t deduct their services. You can deduct any professional business expense such as a business coach, an attorney, a financial planner (wink wink), or anyone who directly impacts your business.

This same principle goes for freelance workers or independent contractors you may have hired to help you out. The designer who did a newsletter for you and a writer who helped you out with promotional materials can be deducted from your taxes. It is important to issue a 1099 form to anyone who made over $600 from you in the tax year.

4. Vehicle expenses

If you are speaking at a conference 50 miles away and you drive your car, you are able to deduct usage, miles, tolls, repairs, gas, and parking costs from your taxes. If you don’t want to calculate all of that, you can take the easier route and deduct the IRS standard mileage rate of 58 cents per mile driven for business use for 2019, up 3.5 cents from the rate for 2018, 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and 14 cents per mile driven in service of charitable organizations.

Whether you add up your individual car expenses or take the standard mileage deduction, your choice should be based on which option will save you the most money. If your business requires an extended amount of travel, the mileage route would probably be the best one for you. Whereas if you drive an older car that needs more repairs, adding up your total costs might be more tax-efficient.

Whenever you deduct money for vehicle expenses, be sure to have the receipt that proves the outing was for business purposes.

5. Salaries and Wages

As a solopreneur, you can deduct the salaries you pay any part-time or full-time employee. If you use a payroll system, you may also be able to deduct from the operating costs of such a system. The IRS also allows you to deduct your employee’s travel expenses, bonuses, meals, lodging, and some employer-paid taxes. Sometimes it’s great being the boss!

Small business owners have many opportunities for tax breaks. From the new desk you put in your office to the cost of your loyal employees, the IRS gives you many opportunities to cut the cost of running your business.

6. Meal Expenses

You may no longer deduct those baseball game tickets with your favorite client. Entertainment expenses are no longer deductible. However, you may still deduct 50 percent of meal expenses if they are separate from entertainment, so you may still deduct the hotdog at the stadium. There are additional exceptions for meals provided at your business location.

7. Additional business income deduction

You may be able to deduct 20 percent of your business income in addition to other regular expense deductions. This deduction has limits and qualifications, so check with your tax professional about it or give us a call!