Tax season has arrived and it’s time to assess your small business for potential deductions. You might be surprised how many deductions can save you money on your final tax amount. Tax law is complicated, but without digging through the piles of legal jargon, here are 5 deductions almost every small business can take.
Right From The Start
Is your small business brand new? Start-up costs are a legitimate tax deduction. The IRS allows you to deduct as much as five thousand dollars related to starting a new business, an amount that also includes the cost of research you needed to start the business. Brand new businesses should always take this deduction.
Furnishings For Now
While you likely pay for your office furnishings all at once, you have two choices when it comes to deducting furniture purchases. The first option is deducting the full amount of your furniture purchase in the year you acquire it. This can help you recoup a significant amount of money, especially if your business is new and you’ve had to invest in desks, chairs, and filing cabinets.
The second option for office supplies, like furniture, is to take depreciation into account. In that case, furniture deduction rules give you a seven year period over which you can deduct the cost of the items. To do this you need to split the cost equally into seven units – you can’t pay it off unevenly.
Be sure to check what the maximum office furniture deduction is for your 2015 taxes. This deduction value varies based on Congressional activity, so consider the impact of future potential changes when choosing how to deduct furniture. Fax machines, computers, and printers also qualify as deductible office equipment and depreciate – and can be written off in the same way as furniture.
If your small business takes you on the road beyond your daily commute, you may be able to deduct various auto expenses, such as gas and maintenance fees, as well as any tolls or parking costs related to business travel. You can deduct these costs both for company cars and private vehicles used for business.
In addition to one-time expenses, you can also deduct mileage for business travel. To do this, you’ll need to carefully track your mileage claims as the IRS looks at this information very carefully. Note the odometer values each time you travel. For 2015 you’ll be able to deduct 57.5 cents for every mile driven.
The Value Of Education
Many careers require continuing education requirements to keep professionals abreast of new technology, or research or recertification courses to ensure you still know how to perform tasks you (hopefully) don’t perform often, such as CPR. If you pay for a continuing education program, you can deduct that cost from your taxes. It’s important to note, however, that you can’t deduct educational training that qualifies you for a new career. These deductions only apply to training in your current industry.
In a related vein, you can also write off the cost of professional society membership and registration for conferences in your field. Don’t let the cost discourage you from participating in these activities – they’re an important part of your growth and development as a small business professional and there’s no need to miss out.
Give And Receive
It’s important for small businesses to be involved in their community, and one way that you can do this is by donating to local charities. Charitable donations are tax deductible, so if you’ve given to any non-profit organizations, be sure you have receipts for these expenses.
Do note, however, that the IRS may be suspicious if you appear to be giving away more money than is appropriate to a business of your size. While being charitable is a wonderful trait, when your claims grow excessive, the IRS may come after you for an audit. Make sure you accurately represent your charitable deductions and have the papers to back it all up.
Home Suite Home
When you run a small business, you typically have two choices – you can either stay late all the time, poring over your work for hours after the business closes, or you can set up space at home to work those extra hours. If you go for the latter route, then you have the opportunity to write off your home office suite as a business expense.
It’s important that you only take a deduction for office space that is used exclusively for work, so if your home office is actually a desk in your living room, you can’t deduct your entire living room and call it your home office. That kind of claim can get you into real trouble with the IRS.
Once you determine what portion of your home qualifies as your home office, you can calculate what percentage of your home the office takes up and deduct that percentage of your home payment or you can claim 5 dollars per square foot of office space. Run both values and see which benefits you the most.
Keep It Honest And File Right
Small businesses qualify for a wide range of deductions, but it’s important to toe the line when it comes to your claims. The IRS sees a lot of business deductions and they can tell when something looks suspicious. Don’t pretend that the football game you went to with friends counts as entertaining clients or that the desk you share with your kid qualifies as a home office. The IRS catches false claims all the time and they will come to audit if your numbers look off.
If you want to make sure your taxes are filed correctly and that you get the most money back, contact Shockley Bookkeeping & Tax Services today. Our team of tax experts are dedicated to the small business sector and will comb through your business expenses and help you understand what deductions you qualify for. You’ve got enough on your hands without learning the ins and outs of tax law – so leave that to us. Shockley Bookkeeping & Tax Services is on your side.