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4 Easy Ways to Save on Small Business Income Taxes

by
Sonu Shukla
on
10/8/2017
4 Easy Ways to Save on Small Business Income Taxes

It can be very difficult for small business owners to navigate the tax code. The language is so unclear and the rules are so unwieldy that unsuspecting taxpayers have ended up overpaying millions of dollars. There are ways that you can save yourself from this result and keep more of your money: all you need to do is make sure you know the most effective strategies for minimizing what you owe.

Making the Most of Your Business’ Entertainment Expenses

Since 1994, small businesses have been able to deduct up to 50% of what they spend on entertaining clients as long as they make sure that they provide the right documentation and stick to the rules. You must make sure that at some point during the course of the interaction with the client, business is actually discussed. This can happen either before, during or after the meal or other expense. In order to ensure that the occasion is acceptable to the Internal Revenue Service, the environment should be conducive to business discussions. The more distracting the environment, the more likely it is that the expense will be questioned. This means that a quiet and intimate setting is less likely to be reviewed than a concert, golf outing, hunting trip or sporting event.

Big Savings Through Automobile Deductions

Businesses that use vehicles as part of their operations can take tax deductions for the miles that they drive for business purposes. This is very helpful, as operating an automobile can be very costly, and even more expensive if there are multiple vehicles used. Though mileage deductions have long been in place the IRS adjusts the rates yearly, For 2017 the new mileage rates are 53.5 cents per business mile, 14 cents per charitable mile, and 17 cents per moving/medical mile.  All that’s needed to take advantage of the deduction is to keep accurate logs of all the mileage being driven for business purposes for each of the business’ vehicles, then divide it by the total miles driven. There are mileage tracking apps like MileIQ, to help you track these miles, or you can meet with your accounting professional to find the method that works best for your needs.

Invite clients to lunch

Meals that are eaten while conducting business are considered business expenses and are therefore eligible for a 50% deduction.  You don’t already need to have a business relationship for a lunch to be considered business related: you can invite somebody whose business you are pursuing lunch, or even take your employees out for a meeting or a reward for quality service or exceptional sales. Even meals that you bring in to the office can count as business expenses, as long as you don’t go overboard in terms of extravagance.  If you’re not sure what is considered too lavish, try to handle your business expenses the same way you do your personal ones: if you wouldn’t use your own credit card on a meal because you think it is too expensive, then the same should hold true for your business’ expenses, even though you get to write half of those expenses off.

Taking the Home Office Deduction is Tough, but May Be Worth It

The idea of working from home holds tremendous appeal both for business owners and their employees, and it offers tax advantages too. Unfortunately, the IRS has made taking the home office deduction a challenge. Still, if you are working from home, the deduction is worth the aggravation. 

There are two home office methods to choose from, the simplified method versus the regular method. Both allow a deduction of home office use of a portion of your home.  But they vary in complexity and recordkeeping requirements.

To make sure that you are taking all of the business deductions that your small business is eligible to take, check with your accounting professional today.

Sonu Shukla, CPA writes for TaxBuzz, a tax news and advice website. Reach his office at [email protected].

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Sonu Shukla

Sonu Shukla

Sonu Shukla is a CPA, accountant, and tax preparer based in Orlando, FL. Sonu Shukla can assist you with your tax preparation and planning needs. Sonu is more than just another accountant in Orlando, Florida; he is a small business owner himself. It is a position in life that grants him the perspective and insight to emphasize with his clients, bringing them the best service possible. A Certified Public Accountant and a Certified Financial Planner, Sonu possesses the skills, education and experience to demonstrate unerring business acumen and passionately planned financial strategies. Being proactive is key for Sonu, tailoring highly efficient tax plans for his small business clients, all in a one on one environment where he and the client can bounce ideas around until every detail is worked out.

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