Running a business comes with high expenses, and sometimes these expenses can be too much for a company to handle. This is where tax deductions come in — they help to bring down the amount of taxes that a business has to pay, which helps keep the business running smoothly.
However, many businesses are not taking full advantage of all the tax deductions. Follow these tips to maximize tax deductions and keep your business running as smoothly as possible.
Keep Track of All Business Expenses
This includes everything from office supplies to employee salaries. Keep receipts and other documentation for all of your expenses, as this will be necessary when it comes time to file your taxes.
It is crucial to stay organized in tracking expenses and for filed taxes. Make sure to keep all of your documentation in one place so that it is easy to find when you need it.
Hire an Accountant
An accountant can help you ensure that you are taking advantage of all the deductions available to you. They can also help you keep track of your expenses and ensure that everything is documented correctly.
Most importantly, an accountant can help you file taxes correctly. This is often a complicated process that accountants have the expertise for.
Get Business Vehicle Deduction
When you purchase a vehicle for your business, you can apply for a section 179 deduction and combine this with a bonus depreciation to maximize tax savings. By doing so, you may be able to deduct the total cost of the vehicle in the first year.
Take note that only vans, pickups, and SUVs qualify. Also, they must weigh more than 6,000 lbs. up to 14,000 lbs. to get their total cost deducted. Other vehicles only get up to $18,200. For instance, if you’re a loyal Toyota fan, you will not benefit from getting an Avalon sedan. If you are looking for a vehicle for sale, a new Toyota SUV, van, or pickup that falls within the weight requirements is your best bet.
You must be able to prove usage of the vehicle for your business more than half of the time. You must also start by December 31, the year you are filing. Limits on section 179 deduction can vary across states, so your accountant must be an expert on current state tax regulations.
In addition, you can claim yearly mileage deductions. By choosing the actual costs method, you can deduct a percentage of the actual miles driven in the year, gas, maintenance, repairs, depreciation, auto loan interest payments, licenses, insurance, registration fees, parking fees, and turnpike tolls.
Get Office, Equipment, Supplies, and Insurance Deduction
If you are renting space for your business, your rent and the cost of all utilities are entirely deductible. Any insurance you are paying for the premises is c9ompletely deductible.
If you conduct your business from home, you can deduct only a percentage of your mortgage or rent, utilities and other expenses related to using your home for business purposes. You must accurately measure what portion of the property you are using for business. That is the percentage you can deduct from all the above.
If you are working from home, you can completely deduct any separate business insurance you are paying for. For instance, the insurance on your business vehicle. You can also deduct a percentage of the insurance paid for the home, corresponding to the area the business is occupying.
All equipment and supplies you purchase for the business are deductible. Ensure that you have complete receipts made out to the company.
Get Salaries and Professional Fees Deduction
Your accountant’s professional fees and all other professional fees you pay to lawyers, consultants, and the like are entirely deductible. So are the salaries and benefits you pay to your employees.
The key is to make sure that these expenses are incurred in doing business. For example, if you hire a consultant to help you launch a new product, the fee would be deductible. However, if you hire a consultant to help you plan your daughter’s wedding, the expense would not be deductible.
Get Advertising and Marketing Deductions
The IRS takes a broad view of what qualifies as a deductible expense when it comes to advertising and marketing. As long as the costs are incurred to promote your business, they should be deductible. Be sure to keep accurate records of all expenses to be prepared if you are audited by the IRS.
That includes all expenses associated with creating and placing advertisements, such as fees paid to advertising agencies or other third-party service providers, design fees, and materials, production, and distribution costs. Even promotional items like t-shirts and coffee mugs are deductible.
Travel Expenses Deduction
The IRS has specific requirements for deducting travel expenses related to business. You must demonstrate that the travel was directly related to business activities. This means that you must have a clear purpose for your trip. You should keep records of all business meetings, conference attendance, or other work-related activities.
Additionally, you can only deduct the portion of your expenses directly related to business activities. For example, if you travel for a conference and spend half of your time sightseeing, you can only deduct half of your airfare and hotel costs.
If you go on legitimate business travels and prove it, you can deduct your airfare, hotel rooms, rental cars, and meals. When claiming travel deductions, it is crucial to keep detailed records and receipts to avoid being audited by the IRS.
Tax Deductions Can Help Boost Your Business
By taking advantage of all the deductions available, you can save a significant amount of money on your taxes. This will help to keep your business running smoothly and allow you to reinvest in your company.