Starting a Small Business
A List of Little-Known Small Business Tax Deductions
It may not always seem like it, but the U.S. tax code is generally designed to favor small businesses, allowing a considerable number of expenses to be deducted from a business’s income. When an expense is deducted, it lowers the overall taxable income, but many of these deductions are missed, leaving small business owners paying more in taxes than they should.
Keeping up with small business taxes and the allowable deductions is an annual task, so it’s no wonder so many get overlooked. To keep small business owners from leaving money on the table, here are some of the most important but little known business tax deductions .
1. Home Office Expenses
Many small businesses are run from home, meaning portions of many home-related expenses could be written off. If a business owner has a physical office in the home, meaning a dedicated space for running the business, they might be able to write off portions of:
Repairs and maintenance
2. Bad Debt
It’s no fun to deal with a situation where a business isn’t getting paid, but take some solace in that bad debt is a tax write off. If a business is owed for amounts that have not been paid, including loans or goods sold but not paid for, the IRS will let it include the bad debt as a write-off if it is included in gross income or has been lent out.
3. Health Insurance
Health insurance is one of the large expenses we hate, but we have to have it. At least it is tax deductible for many types of small businesses. This can be a pretty significant deduction as it doesn’t just include the owner’s insurance but the entire family’s insurance costs. Under certain circumstances, some portion of healthcare costs might even be business tax credits, which means they may be deducted at one for one from the final tax bill.
4. Wages and Payroll Taxes
When self-employed, paying a regular wage comes with benefits. By paying a salary rather than a dividend or distribution, the owner avoids the self-employment tax and passes the payroll tax deduction to the company. In fact, all employee wages and payroll taxes are deductions from income.
5. Startup Costs
Before a business officially begins, it usually has costs related to starting it. If money has been spent on things like market research, advertising the business launch, product research, professional fees, equipment, or a property lease, the owner could deduct $5,000 immediately if the total costs were below $50,000.
6. Taxes, Fees, & Interest
If a business is in a state or local jurisdiction where it is required to pay tax, those taxes might be deductible on a federal return. Any interest and late fees could also be deducted if business expenses are paid with a credit card. Other fees associated with activities, such as bank card processing or payment fees, are also deductible.
Make It a Priority To Take Advantage of Every Deduction
Small businesses can save big on their tax bills when they maximize their tax deductions. Every small business owner should work closely with their tax professional and ensure they take advantage of every opportunity to lower their tax burden.
Randy Tudor, EA, CTRC
Randy Tudor, EA, CTRC has served as Principal and founding member of Tudor Financial Group since 1985. His wide-ranging career has involved working with many thousands of clients and small business owners, including Fortune 100 companies, in matters of accounting, tax preparation and planning, auditing, and financial. Additionally, he has extensive experience with QuickBooks since 1996, and is a QuickBooks Advanced Certified ProAdvisor. Randy is fueled by the passion he has for helping his clients achieve success in their personal and business lives. He believes the most important aspect of the business he loves has always been getting to know each of his clients and being able to positively impact their financial status and peace of mind. Tudor Financial Group has helped hundreds of clients resolve their IRS tax problems as well as working with state revenue departments. We will work hard to solve your tax problems as well. After all these years in the business, Randy continues to challenge himself and stay updated with the current tax code, planning strategies and ever-changing technologies to better serve his clients and lead Tudor Financial Group. He believes it's vitally important to continually educate himself to improve his technical expertise and financial knowledge. In 2018 alone, During 2022, Randy has spent more than 120 hours of continuing education studying tax law, rules and regulations. With the studies Randy and the TFG team have tackled and continue to tackle, he believes the company is fully prepared and qualified to handle any tax matter clients might encounter. Randy is proud to have a family-focused tax and accounting practice. His wife and both of their sons are closely involved in the business. They all share the same work ethic and business values.
In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.
Join 60,000 who get our weekly newsletter. No spam.
We know tax and accounting issues are complicated.
Do you have additional questions on this topic for this author?