Tax deductions for businesses just make sense. You should only pay what you have to in taxes, and deductions give you a systematic way to work through your income and expenses and pay the taxes you should without overpaying.
In general, the costs of running a business can be deducted from your income. Many people don’t realize that you can save money by helping your insurance company make money. Consider the following deductions from insurance premiums to employee salaries to decide if your small business would be eligible to claim them.
#1 – Office
If you rent an office, you can deduct the cost of the rent. In addition, whether you rent or own the property, you can deduct the costs of maintaining the property, including professional cleaning and snow removal. You can even deduct the cost of utilities for your office and maintaining a website.
You can even deduct office costs if you have a home-based business with an office dedicated solely to office work. You can deduct $5 per square foot of office space up to 300 square feet. You can also choose to itemize your office deductions.
#2 – Insurance Premiums
Insurance coverage is one of the essential ways to protect your business from the financial impact of unexpected catastrophes.
Some business owners neglect to purchase insurance because it’s hard to justify the expense when starting. However, the fact that insurance premiums are deductible can make it easier to afford the insurance you need to keep your business running even following a crisis.
Business insurance protects your office, equipment, and liability, but physical and intellectual. So, if someone sues you for libel or if someone slips on your floor and gets a concussion, the liability portion of business insurance can help cover you.
#3 – Vehicle Costs
If you have a vehicle that you use strictly for business purposes, you can deduct all the costs associated, including the purchase price, maintenance, and insurance costs for business vehicles. You can also take a per-mile deduction for every mile you drive.
If your vehicle is used for personal and business, you can take the standard mileage deduction for the miles you travel for business.
#5 – Business-Related Meals
If you take clients out to eat, you can deduct half the meal cost, but you must make sure you discuss business during the meal. You can also deduct half the cost of taking employees out to eat.
However, you can deduct the entire cost if you treat all employees to a meal or host a company party.
#6 – Travel Expenses
If your business requires you to travel, you can deduct those expenses as long as they’re not extravagant. For example, if you travel by plane, you can deduct the cost of a main cabin ticket but not a first-class one.
Keeping receipts is important to deducting travel expenses because receipts prove what you spent and that it was for ordinary and necessary expenses, not luxury items and experiences.
#7 – Loan Interest
Homeowners can deduct home loan interest on their mortgage, and business owners can deduct the interest on small business loans and business property mortgages.
Keep in mind, you can’t keep the loan funding in a bank account for later and deduct the interest. To qualify for a loan, you have to prove your income; To be eligible for a deduction, you have to use the loan for your business.
#8 – Employee Salaries
Your employees will be taxed on their salaries. That’s why you don’t have to pay taxes on the money your pay to others.
Businesses of all sizes should take advantage of tax deductions. These deductions can make the difference between being profitable and not for small businesses. So, deduct everything you can, and consider hiring a financial advisor to help identify ways to improve your cash flow and maximize deductions.