Being an entrepreneur is a tough thing nowadays not just because of the sheer amount of increasing wannaprenurs but also because of the low income and margins they are generating and hence,
we have compiled a list of most commonly Overlooked tax deductions by entrepreneurs which can save business owners and most importantly entrepreneurs thousands of dollars per year. As it is said A penny saved is a penny earned .
Marketing and Advertising Budget
If you are a business owner then you know how much is spent on marketing and advertising budgets in acquiring new customers or qualifying customers and get your word out there,
the good news is all of that is tax-deductible i.e. if you are sending out flyers, making ad campaigns on Facebook or Google or Twitter or any other platform like this or you are buying out shelves in the event then all of it is tax-deductible.
Home Office Deduction
If you are working from your home and you have a particular location for your office in your home which you don’t use for anything else then you are eligible for a home office tax deduction and there is a fixed price for this deduction i.e. $5 for every square foot of space used for the business, up to 300 square feet.
Office supplies are a good way for a tax deduction because in an office many things like the stationary are used for business purposes and if you can prove that the things you purchase like the pen, pencil, ruler or any other kind of stationery are used for business purpose only then you are eligible for a full tax deduction.
but if you use some items like your iPad or a laptop for both Business and Personal uses then you will only be eligible for a tax deduction on the percentage of use you use it for office.
Learning new things
If you are new to business then you know that there are a thousand things to learn in a business like the marketing, accounting, finance , investing advertising, some times graphics as well, etc, etc and if you are learning all those things which is related to primarily your business then the money spent on them will be tax-deductible
It is the most underutilized tax deduction and that is mileage if you travel using your car for business purposes then you are eligible for tax deductions but going from your home to the work is not considered under your mileage tax deduction but going for a business meeting from your office to the business meeting place is considered under the mileage
and there are many apps that you can use to track your mileage for business and personal and you can get the help in measuring the mileage for your business and avail the tax benefits.
If you have to travel a lot for your business then any expense like the hotel expenses, the meal expenses the airfare, etc. comes under tax deductions and you can avail tax deductions on them easily
Starting up Cost
Even before you go into business there are many things which need to do to prepare for the competition and etc. i.e.
- Legal and accounting fees
- Your license, permits, etc.
- Cost of RND
- Employee training
- Your inventory expenses
- Long term assets like a computer, equipment, machinery, etc.
- cost of making a partnership or liability company etc.
If you are considering upgrading your office by buying a new chair for office then you can easily avail the tax deductions on them and know that there are two types of tax deductions in it that is once that is one time when you purchase the office supply for through the throughout the lifetime of the office supply.
If you are a nature-loving person and the company as well love to save trees and the environment then you can avail tax benefits by installing a solar panel in a workplace or purchasing a hybrid Car this year.
Some Businesses require heavy machinery and different types of equipment to run it smoothly and if you are one of them then you can avail of a section 179 deduction otherwise known as special depreciation allowance and it has a limit of $500,000.
If you attended a seminar or a workshop to enhance your skills to run the business than those come under the tax benefits and the textbooks you purchase or the donations to business organizations can also be availed under tax deductions.
Some Extra Tax Deductions
- A state in the United States of America can also have their individual tax deductions which you can avail
- Gifts are also tax-deductible then you can read more about them here
- If you are planning on a vacation with your family we loved once then you should consider combining it the business trip so that you can avail the percentage of benefit on the business trip
- You can avail tax benefits on health insurance if you are a self-employed individual comma less than 25 person company
- Having a retirement plan can help you save
Some tips for effective Tax filing
- Try to keep your Personal and Business expenses on different accounts and credit cards because it may not seem like a big deal to you to pay your employees and buying a fancy necklace for your loved ones using the same bank account or credit card but,
- it is a big deal for the IRS because they don’t want to make the tax deductions on Personal and Business expenses and if you unintentionally or intentionally try to trick the IRS it can result in penalties or audits which can bring hidden things on the surface.
- If you need some extra time for filing your taxes then you can use extension form 7004.
- If you are in a business then it sometimes becomes overwhelming for everyone but you have to keep it clean so that you don’t have to face the last minute burden of managing something by which what we mean is if you keep a record of all the expenses which are done by your business then you can easily file the taxes and will not have to face the last minute burden of finding receipts, fortunately, there are many apps which can help you manage your expenses and keep a record of them like expensive, shoeboxed, etc.
- Not only you have to track and manage on all the expenses for the business you should also keep a record of all the documents filed and expenses for at least 7 years because the IRS or any other government agency can ask you for those documents if you undergo a penalty later
- If you Hire any freelancers, attorneys, contractors throughout the year and paid them an amount greater than $600 then you are obligated to issue 1099 MISC forms to both the individual and the IRS
- Make sure when you send your forms to IRS where properly signed and sealed and documented if they are not there considered invalid and you have to refile it.
If you are a Seafarer then you can check out this post for Seafarer Tax Deductions.
We hope we were able to save you thousands of dollars in taxes and if you have a tip which we have mentioned here, please share the tip to help the startup community because every penny saved is a penny earned.