1. Business Meals
You can deduct 50% of food and drink expenses related to your business. For the deduction, ensure you document the date, location, business relationship of attendees, and total cost of the meal. Keeping receipts and notes on the back can make tracking easier.
2. Work-Related Travel Expenses
Business travel expenses, including airfare, hotels, rental cars, tips, dry cleaning, and meals, are deductible. To qualify, ensure the trip is necessary for your business, takes you away from where your business operates, and lasts longer than a normal workday, requiring rest or sleep. For more details, refer to the IRS website.
3. Work-Related Car Use
If you use your car strictly for work-related purposes, you can write off all costs associated with operating and maintaining it. If your car use is mixed between business and personal reasons, you can only deduct costs that are related to the business usage of the vehicle. You can claim the mileage you use for business driving, either by deducting the actual miles traveled for business or by using the standard mileage deduction of $0.56 per mile driven.
4. Business Insurance
The cost of your company insurance is deductible on your tax return. You can also write off your renter’s insurance costs as part of your home office write-offs if you have a home office or utilize a section of your house for business. To substantiate your deductions in the case of an audit, make sure you keep thorough records of the insurance payments you make.
5. Marketing and Advertising Costs
Any costs associated with promoting or advertising your business can be written off on your taxes. This includes expenses related to creating ads, purchasing ad space, and printing marketing materials. Keep track of all marketing-related expenses throughout the year so you can accurately report them come tax time.
6. Charitable Donations
If your small business makes donations to registered charities, these contributions are tax-deductible up to a certain limit based on your income. Make sure to get a receipt for all donations made, and keep records of the amounts and recipients for tax purposes.
7. Home Office Expenses
If you use a portion of your home exclusively for your business, you can deduct costs associated with that space. This includes rent, utilities, internet service, and other related expenses. Keep in mind that this deduction only applies to the portion of your home used solely for business purposes.
8. Employee Salaries and Benefits
Any wages or salaries you pay to employees are tax-deductible, as well as any benefits such as health insurance or retirement plans. Make sure to keep detailed records of employee payments and benefits throughout the year to accurately report them on your tax return.
9. Legal and Professional Fees
If you’ve hired a lawyer, accountant, or other professional to help with your business, these costs are tax-deductible. Keep track of all fees paid and make sure they are related to your business operations.
10. Software and Equipment Expenses
The cost of software and equipment used for your business can be deducted as long as it is necessary for running your business. This includes computers, printers, software licenses, and other office supplies. Make sure to keep detailed receipts and records of these expenses.
11. Education and Training Costs
Expenses related to education and training that directly benefit your business can be deducted from your tax return. This includes courses, seminars, workshops, and professional development programs for you or your employees.
12. Office Rent
If you rent office space for your business, the cost is tax-deductible. Keep track of all rental payments throughout the year and report them accurately on your tax return.
13. Retirement Contributions
Any contributions made to a retirement plan for yourself or your employees are tax-deductible. This includes plans such as a Simplified Employee Pension (SEP) or a Savings Incentive Match Plan for Employees (SIMPLE). Make sure to keep records of all contributions made throughout the year.
14. Interest on Business Loans
If you have taken out a loan for your business, the interest paid on that loan is tax-deductible. Keep track of all interest payments and report them accurately on your tax return.
15. Office Supplies
The cost of office supplies used in your business can be deducted from your taxes. This includes items like paper, pens, ink cartridges, and other necessary supplies. Make sure to keep receipts and records of these purchases.
How Do Business Tax Deductions Work?
Business tax deductions function by reducing your taxable income, which in turn decreases the amount of tax owed to the government when filing your tax return. To maximize and correctly claim the available deductions, it’s beneficial to consult a professional, such as a CPA. A certified accountant is trained to understand the complexities of tax deductions and how they apply to your particular small business.
Business Tax Write-Offs
When filing their income taxes, freelancers, small enterprises, and entrepreneurs can claim a variety of business expense write-offs, such as:
- Mileage and costs for cars
- Office costs, such as utilities and rent
- Office supplies, including software and computers
- Premiums for health insurance
- Bills for business phone usage
- Courses for Continuing Education
- Travel-related costs for business, such as airfare, hotels, and vehicle rentals
- Letters
What Is a 100 Percent Tax Deduction?
A 100 percent tax deduction refers to a business expense that can be fully claimed on your income taxes. For small businesses, fully deductible expenses include:
- Furniture purchased exclusively for office use within the year of purchase
- Office equipment, such as computers, printers, and scanners
- Business travel and associated costs, including car rentals and hotels
- Gifts to clients and employees, up to $25 per person per year
- Health premiums for self-employed individuals
- Annual business phone bills
