8 Essential Tax Deductions for Small Businesses

Unlock the secrets to maximizing your small business tax savings with these 8 crucial deductions. From travel expenses to home-office setups, ensure you're not leaving money on the table as you navigate tax season.

If you missed the first part on tax deductions, check out our post on Maximizing Tax Deductions for Small Businesses: Understanding Deductible Driving.

As a small business owner, are you certain you are also capitalizing on all the other forms of deductions you could be taking? If not, read on.

1. Track your miles

When business pulls you off to a new city or a nearby destination, keep track of your miles, your parking costs, tolls paid, and the expenses you spent on conference fees and travel. Be specific as you keep your records so you can differentiate later on which parts of your trip were for business and which parts of your trip for personal reasons.

2. Growing into someone better

Working on your own self-improvement as a small business owner matters. The success of owning and running a small business is always related to how comfortable you feel actually going out of your comfort zone. If you’re not growing as an individual, chances are your business won’t be growing either.

Costs that help you maintain your career and improve your own expertise, like the cost of training manuals, books, and classes, are deductible. Fees paid towards member associations affiliated with your small business or professional certifications count as deduction, too. 

3. The home-office deduction

If you are a small business owner who runs daily operations and works out of your home, you can qualify for the home-office deduction. In addition to a percentage of your rent or mortgage interest, you can also write off the cost of maintaining your actual work space. This home-office space must be dedicated to the business activity.

For 2017, the prescribed rate set by the IRS is $5 per square foot, with a maximum of 300 square feet. For instance, if the office measures to be 150 square feet, then the deduction would be $750 (150 x $5).

Don’t toss your water and electric bills out with the trash, either! You’ll be washing your hands and needing that heat in the dead of winter while you’re still open for business.

Small business owners afraid of including their home office dimensions in fear of being audited should follow these rules. According to the IRS, these home office deductions can legally include mortgage interest, insurance, utilities, repairs, and depreciation.

4. The cost of advertising

Promoting your talents does not come cheap. The cost of business cards, digital advertising, website development, buying a domain and paying for web hosting services are all line items that add up quickly. The promotion of your goods and services can be deducted. If you attend a trade show or a vendor event, you can also write off the travel expenses and the associated fees.

5. Your business equipment (Yes, smartphones count!)

When we say “business equipment,” don’t immediately assume because you don’t own a forklift, a fleet of vans, or a delivery truck you won’t have business equipment to deduct. Cell phones, computers, and other equipment that you use to run your business are also deductions.

6. The cost to start your business

If 2017 was the first year of you being in business, you can deduct up to $5,000 of your startup expenses. If you used an attorney or an accountant to help get your business off the ground, these fees for services can also be deducted.

7. Health insurance coverage

Self-employed individuals may be able to deduct insurance premiums for themselves and for their family members.

8. Trashing “obsolete inventory”

Another tax deduction small businesses can take is if they have a product they can’t sell. If they destroy these products, they can deduct these items as “obsolete inventory.” To qualify for this deduction, you need to have disposed of the “obsolete inventory” before the end of the year, so, in this case, 2017. If you can’t trash these goods outright, donating the goods to charity is another way of receiving a tax credit.

Again, filing as a small business means that you’ve got to learn and have an understanding of tax code basics. Certain tax breaks and deductions for small businesses offer a chance to keep more of your well-earned money in your own pocket. Keep on learning...this knowledge will keep you profitable.

We hope you are enjoying this three-part, curated blog series while finding beneficial information as you prepare your own small business taxes.