If you are a small business owner looking to save some money during tax season, you need to know how to maximize your deductions. Of course, having records to support your expenses is just as important as using the proper tax forms. While using W-2 and/or 1099 software can prove helpful, consulting with a tax professional is recommended because he or she will be able to look through your income and expenses and advise you accordingly. Overall, tax deductions save small business owners the cash they need to continue to grow their businesses.
If you are a small business owner, there is a good chance that you use a vehicle like a car, truck, or van for business purposes. The operating costs for that vehicle is a legal deduction if you have records to prove that business usage. When deducting costs, you can keep records of gasoline and oil changes, or you can use the standard IRS business mileage rate to deduct your cost.
- Home Office
Download and install iMessage Messenger on PC. iMessage for PC Download available on Windows 7/8/Vista/XP. Access iMessage on PC Windows & Desktop Computers by following few Steps. Get Direct Link to Download iPadian iMessage for PC
The idea that small business owners target themselves for an audit if they take a home office deduction is a myth. Countless small business owners have realized the benefit of using a home office deduction, and they are well within their right to do so as long as the home office is dedicated solely to business work. For example, do not attempt to put a computer in your kids’ playroom and call it a home office.
Small business owners have a couple of options when it comes to the home office deduction. One method is to calculate the square footage of the home office and divide by the total square footage of the home. That percentage is the fraction of the mortgage, insurance, electricity, and other home costs that you can deduct. Alternately, some small business owners take advantage of the new simplified method for taking the home office deduction, which is based on $5/square foot for up to 300 square feet, or $1,500 per year.
- Business Office Utilities
While most small business owners remember to count office supplies as deductions, some overlook the utilities as business expenses. The water, power, trash, and telephone bills at your business are completely deductible as regular business expenses. If you use propane gas or oil to heat the office in winter, these costs are 100% deductible as well.
When it comes to the phone bill, be sure to deduct it properly. If you have a dedicated phone line, its cost is completely deductible. But, if you have a phone line that combines business and personal calls, you should go through your bills and highlight business calls to deduct only the business-related costs on the bill.
- Employee Expenses
Of course, you deduct the amount you pay employees for the services they perform. But, don’t forget the reimbursements you provide employees for expenses relating to gas, meals, tips, hotel accommodations, transportation, baggage fees, etc. The key to taking these deductions is having an accountable plan to show that all reimbursed expenses are business related. This entails having all related documentation such as receipts and a consistent process for gathering documentation and making reimbursements in a timely manner.
- Lunch Meetings
While you may not be able to have business lunches every day, you should strive to have several a month. If you purchase lunch, either dine-in or take-out while you work, you can deduct a large percentage of your meal expenses. So, if you and your partners or employees have meetings, schedule them over lunch to deduct 50% of meal costs while conducting business. Just be sure to keep all of your receipts and keep the expenses within reason.
For small business owners, legitimate deductions can be a lifesaver at tax time. Knowing which deductions to take and having proper documentation to support them is key.
About Julie Morris:
