As a small business owner, there’s a lot to learn when it comes to tax season. The process of filing taxes can be difficult on its own, but add in the fact that you own a business, and now you have much more to learn. Whether you’ve hired an account or plan to file your taxes yourself, there are a few tips that you need to know about.
Knowing these several small business tax tips is one of the best ways to ensure that you save money for your small business when filing your taxes. Read through our list of tax tips below to file your taxest smarter this year. Here’s what you need to know!
1. Your Home Office
If you work from a home office, you might be surprised to learn that you might qualify for a tax deduction on your home-office costs. When wanting to claim a home office as a tax deduction, you’ll need to have kept all of your receipts and other statements to use as proof and to ensure you’re putting in all the correct numbers.
To claim a home office, the office needs to be a separate space from the rest of the home. You can’t claim your living room as your home office. You’ll also be able to deduct the cost of your business computer for your home office as well.
To determine the cost of other home expenses for your home office, you’ll need to measure the size of your home office and divide it by the total square footage of your home. The percentage you end up with is the amount you can claim for things such as utilities, rent, and so on.
2. Traveling Costs
If your small business requires you to travel for any reason, you’ll be able to claim this as a deduction as well. Some traveling costs to keep in mind when filing taxes are airfare, hotel costs, rental car costs, laundry fees, and more. These are all things that you’ll need to keep receipts of to ensure that you can file them on your taxes correctly.
Conference costs while traveling are also deductible as long as the reason for the conference is to better your business. Any things done for pleasure while traveling for business, such as visiting amusement parks are not taxable.
3. Technology Costs
As a small business owner, you know just how important it is to stay up to date with the latest technology. Doing so is the only way to keep up with your competition. When looking up tax codes, under section 179, it states that technology costs such as computers, printers, company vehicles, and more are all deductible.
Just keep in mind that when deducting a vehicle as a company vehicle, its main purpose must be for your business and your business only. Business software is another taxable expense, so you’ll want to be sure to purchase any software required for your business to succeed. You can then deduct it from your taxes.
4. Business Loan Tax Deductions
If you’ve taken out a business loan for any business purpose, understand that you can deduct the built-up interest for this loan on your taxes. However, there are some things to consider when determining if your business loans are taxable loans or not.
For example, the loan must have been taken out from an actual lender. Borrowing money from a friend or family member won’t qualify as an actual business loan. There also needs to be a legally payable debt by you with intentions of paying the lender back.
Gathering information to prove this shouldn’t be too difficult as the lender will have the documentation.
5. Your Business Equipment
All business equipment used is taxable. This equipment can be anything from the technology items listed above or larger items such as office furniture, industrial ovens, and other large asset items.
The best way to deduct these items from your taxes is to have kept all receipts showing how much you paid for the equipment and when. Think of anything you’ve bought this year to help your business, and consider using it as a deduction. If you didn’t keep paper receipts, check your bank statements if you used credit or debit cards to pay for it.
6. Carried-Over Deductions and Credits
As a business owner, you’ll most likely have a variety of expenses that you want to claim. Unfortunately, not all of these deductions will qualify for one single year. However, keep in mind that some of these deductions and credits might carry over into the next year.
You need to be on the lookout for these deductions as you won’t want to miss out on them. Anything that you can’t file this year, see if it’ll qualify for next year’s taxes. Some of these things might include operating losses, capital losses, charitable deductions, and some others.
7. The Non-Taxable Expenses
Aside from all of the things that you are able to claim on your taxes, it’s important to know what things can’t be claimed. For example, any food expenses that you acquire for business reasons will only be deducted for up to 50%.
Any entertainment expenses no longer qualify for a tax break. This means that if you plan a meeting with a client and take him or her out to a sports event, the food expenses you build up from the meeting will only be taxable up to 50% and the money you spend on the event itself won’t qualify at all.
Know These Small Business Tax Tips Today!
As a small business owner, it’s essential that you know these small business tax tips before tax season. Keep these tips in mind when filing your taxes and you won’t have to worry about missing a single item!
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