5 Commonly Overlooked Small Business Tax Deductions
Small business owners have access to many more tax deductions than the average person. Because there are so many possible deductions to keep in mind, it’s easy to overlook some of them. Make sure you’re taking advantage of every deduction you can at tax time, and don’t miss these five major ones.
1. Home Office
If you run your business from your home, home office tax deductions are useful because they allow you to deduct a percentage of your overall home’s square footage from your rent or mortgage. You must prove the space is used only for work and not for pleasure; for example, your child cannot be allowed to use your work computer.
The IRS also offers a simplified version that enables homeowners to deduct $5 per square foot, up to a maximum of 300 square feet. Rather than tracking every expense associated with a home office, the flat $5 rate makes it easier for business owners to calculate their deductions more easily. Take note that this method does not allow you to recapture the cost of depreciation should you sell your home, though. You may want to speak to a tax professional to weigh your options.
2. Office Supplies
Make sure to save all of your receipts from those trips to Office Max. Purchases from computers and printers to small items like pens and paper can be deducted from your taxes as an office supply expense, provided you actually use them for your office.
3. Software Subscriptions
Many people do not feel the need to shell out several hundred dollars for Adobe Photoshop purchases when the new Creative Cloud subscription works just as well. That $10 monthly expense is tax deductible, provided the software is used for your business. Any other subscriptions, such as professional memberships, can also be deducted.
If you travel for business to a conference or networking event, you should enjoy yourself and stay in a nice hotel — the entire expense is deductible. You can even deduct up to 50 percent of your food expenses while on the road (minus alcohol), so keep that in mind. Even smaller expenses, such as dry cleaning your clothing or tipping the bellboy, can be deducted.
5. Telephone Charges
In today’s world of smartphones, the cost of communication is negligible. That said, there are times when you may need to hold a conference call or speak with someone in another country, which can result in high fees. Keep track of all of these fees and make a month-by-month tally of your expenses to add to your business deductions at tax time.
HB Hot Rods and Hogs was started by Ed Syer in the back of his auto repair shop in Huntington Beach where Ed was building