Top 10 Small Business Tax Deductions To Save You Money

small business tax deductions write offs

As a small business owner, you need to save as much money as possible. One great way for small businesses to save money is by taking advantage of tax deductions during taxes time. 

Whereas individuals are only privy to a few tax deductions, businesses are privy to dozens of tax deductions. And if you or your accountant know what you're doing, these business tax deductions could really add up.

Curious as to what small business tax deductions are available to you?

Read on for a tutorial on taxes and write-offs! Here are 10 of the most common business tax deductions and exemptions. 

Small Business Tax Deductions

There are tax deductions available for all types of expenses. While not all of these tax deductions will apply to your business, many of them will, so discuss them with your CPA. 

1. Employee Wages

If you have employees, you are allowed to deduct all of the wages, commissions, bonuses, and taxable benefits that you pay to them. This can result in a fairly substantial deduction come tax return time. 

Note, however, that this only includes employees that you have hired for long-term work. You can not use this deduction for money that you've given to contractors and other external partners. 

2. Contractor Payments 

Though you can't include contractor payments in your employee wage deduction, you can still deduct said payments. As long as you can formally document a payment to an outside contractor, you can deduct it. 

How do you document payments such as these? With a 1099-MISC form.

A 1099-MISC form should include the tax details of the contractor you paid as well as the sum of the money that you paid him or her in a specific tax year. Each contractor you work with should receive a form such as this.

3. Loan Interest 

Another deduction that small business owners can take advantage of is a deduction on loan interest. If you make use of a business line of credit, you can deduct all payments which go toward interest. 

While personal loans used for business matters can come with some deductions, their deductions aren't quite as straightforward. You generally won't be able to deduct 100% of the interest paid on a personal loan. 

4. Rent 

While you may run your business out of your home, there's a good chance that you rent a commercial property of some kind. If so, you should know that you can deduct its expenses in your taxes. 

This is true regardless of what type of building it is. Restaurant, factory building, warehouse, office.

They're all commercial properties, and their rental costs can all result in a tax break. 

5. Specific Taxes 

As a business, you can take deductions on specific taxes that you pay throughout the year. These taxes include real estate taxes, licensing fees, and sales taxes, to name just a few. 

You should also be sure to deduct your half of the tax paid on your employees' FUTA and FICA taxes. FUTA covers unemployment tax while FICA covers Social Security and Medicare.

6. Travel Costs 

If you ever travel for your business, you can deduct the costs associated with your travel from your taxes. This includes costs incurred while visiting a business partner, attending a trade show, or joining up at a business convention. 

Not only can you deduct things such as fuel costs and airfare, but toll costs, hotel costs, and parking costs as well. If you ship something to another location so that you can use it at said location at a later point, you can deduct shipping costs also. 

Note though, that travel costs only apply when they are racked up outside of your standard business hours. For instance, if you're spending the night somewhere to complete business-related work, you can deduct your travel costs. 

If you're going to deduct these costs, you need to make sure to have them documented in official receipts. Save proof of expenditure for every purchase that you make. 

7. Utilities 

Whether you run a restaurant, a factory, a warehouse, an office, or otherwise, you are bound to rack up fairly costly utility bills. The good thing is that, as a small business, you can deduct these costs from your taxes. 

If your utility bill is 100% dedicated to your workspace, you can deduct 100% of the expenses. If, on the other hand, your utility bill is marginally dedicated to your workspace, you can only deduct the percentage of the utility that your workspace is using. 

For example, let's say you have a home office out of which you run a freelance web design business. This office makes use of electricity, but only comprises around 10% of your house. In this scenario, you could only deduct 10% of your total electricity costs. 

8. Insurance 

Insurance costs can also be deducted from your taxes. Well, most of them, that is. While you can't deduct the premiums paid on life insurance, you can deduct the premiums paid on health insurance, general liability insurance, workers' compensation insurance, commercial auto insurance, and more. 

Need help finding specific insurance deductions? A tax accountant can help you. 

Don't have the money to hire a tax accountant? A tax filing program such as Turbo Tax will suffice.

These programs are very affordable, and can usually be found at discounted prices.

9. Repair Costs 

Perhaps the water heater in your office stopped working? Maybe you needed an electrician to rewire your commercial building? In any case, you can deduct the costs associated with business-related repairs. 

Note, that this only covers repairs. While you can typically deduct costs associated with improvements and additions, you usually have to do so through depreciation deductions for asset depreciation.

10. Legal Fees 

Do you keep a lawyer on retainer? Did you have to hire an attorney to defend yourself in a court of law?

If so, you have another tax deduction that you can take advantage of. All legal fees paid by a business can be deducted from taxes. 

Find More Financial & Tax Tips

Well, you've learned about small business tax deductions. Now, maybe you're looking for more financial information for your business. If so, you're in the right place to put your tax deduction savings to good use. 

Bootstrap Business is loaded with information on business finance, helping small businesses to operate in the most cost-effective manner possible. Check out some of our other financial articles now to learn more about accounting, bookkeeping, taxation, and budgeting.

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