Each tax season, a sense of dread fills small business owners across the country. While you may have wisely set aside funds throughout the year to cover your tax bill, the amount that you owe may still come as a shock. Unlike large corporations, every cent truly counts when it comes to small businesses. To ensure that you make the most of available deductions to reduce your tax bill, consider the five most commonly overlooked small business tax deductions.
If you operate your business directly from your home, you likely already know of the home office deduction. However, many business owners do not realize that even if you have a brick-and-mortar location separate from your home, your home office may still qualify as a business expense deduction. If you use your home office exclusively for purposes related to your business, including accounting or other necessary tasks, you can deduct these costs. To calculate the deduction, you will need to prepare two things. These include the square footage of your total home as well as the office space.
Self-employment taxes for small business owners can be costly. You can determine these taxes, owed to Social Security and Medicare, by taking your annual personal income into account. Fortunately, you can deduct one-half of the taxes owed to Social Security and Medicare on your personal tax return.
Advertisement is crucial to the success of many small businesses. Whether you rented a billboard, printed flyers or paid to advertise online, these expenses are deductible. For more unique advertisement strategies and the costs associated with them, be sure to consult a tax professional. Together, you can determine whether the costs are considered ordinary or necessary for your business.
Banks are known for charging fees for everything from ATM withdrawals to monthly maintenance fees. While a small fee here and there may not seem like much, you may be shocked by the amount of fees you paid throughout the year. If your bank account is used exclusively for business, you can deduct many of these typical fees. They count as a business expense.
In the event that your business has required you to wine and dine potential clients, be sure to save the receipts for each outing. Many find that it is helpful to make a note of what the meeting entailed and record it on the back of the receipt. If you have receipts and provide adequate information regarding the meeting, you can deduct 50 percent of the total bill. It will count as a business expense.
By carefully examining your eligibility for these commonly overlooked small business deductions, you can significantly decrease the amount of your tax bill this tax season. If you don’t know if you qualify for any of these deductions, be sure to consult a professional for advice that is specific to your situation.