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Are You Taking Advantage of These 5 Small Business Tax Deductions?

Posted by Erick Cutler, CPA on Mar 27, 2014 9:00:08 AM

Taxes aren't the most glamorous part of owning your own business, but when it comes to maximizing every dollar you invest, tax deductions are important. Deductions limit the amount of taxes you pay on your business revenue. The result is more money in your pocket.

Unfortunately, most small businesses overpay on their taxes by overlooking deductible expenses.  If you aren't including these 5 small business tax deductions on your return, you could be missing out on big bucks. 

Can you Claim Startup Costs?

It takes money to get your business up and running. If you are a partnership, you can claim up to $5,000 of business start-up and $5,000 of organizational costs you spend before the "Now Open" sign even hits the front door. This $5,000 deduction is reduced by the amount your total start-up or if total organizational costs exceed $50,000. The remaining costs must be amortized.

Startup costs may include:

  • Surveys to gather information about a potential market
  • Advertisements/marketing cost for the opening of the business
  • Salaries and wages for employees who are being trained and their instructors
  • Salaries and fees for executives and consultants, or for similar professional services

Do You Travel Out of Town for Business Purposes?

Do you travel out of town for business purposes? Nearly any cost associated with business travel is deductible up to a certain percentage. This includes business meals, travel costs and lodging for your trip.  

Other deductible expenses include: 

  • Fares for taxis or other types of transportation
  • Tips you pay for services related to deductible expenses
  • Dry cleaning and laundry

What Home Office Expenses Are Deductible?

According to recent statistics, the majority of our country’s small businesses are home-based. Luckily, working out of a home office can lead to several tax deductions. For example, business owners with a home office can deduct for the dedicated business space used in the home. Essential services like internet and phone used in running the business can also be deducted dependent on the percentage of business versus personal use.

Tax Deductions on Professional Education and Memberships

Professional fees and membership costs that are related to your business are tax deductible.  This can include: 

  • Boards of trade
  • Business leagues
  • Civic or public service organizations
  • Trade associations

Business-related books and subscriptions to magazines, newspapers, and trade publications are also deductible.

How Much Mileage Can Be Written Off?

Small business owners can write off any mileage they put on their vehicle when the purpose of travel is to conduct business. This deduction could range from depositing a check at the bank to driving to meet a client. For 2014, the IRS lets you deduct 56 cents per mile (down from 56.5 cents in 2013).

It sounds simple, but many business owners fail to track their mileage because of the effort it takes to manage the process. To ensure you benefit from this deduction, keep a simple mileage log in your car or use a smartphone app like MileBug to document your trips.

If you remember one thing, don't forget to keep your receipts for any business-related expense. Also, keep your calendar updated with your travel and business meetings or activities. These efforts will help to discover deductible items you may normally overlook. Have a conversation with your CPA or tax advisor to understand how to benefit from these and other deductible business expenses.

As a small business owner, it is up to you to find every cost-cutting opportunity available. These 5 ways to save on your business taxes will help you save money, which means more profits back where they belong — in your pocket. 

About Erick Cutler, CPA

Erick joined Goldin Peiser & Peiser in 2002 as a senior tax associate and now serves as a partner in the tax department. He focuses on tax compliance and consulting work in the healthcare and real estate industries, where he oversees the preparation of all annual federal and state compliance and regularly reviews the client’s financial statements. He also consults with the client on the health of their practice or business, making sure they understand the business and tax aspects of their strategy and suggests new ideas they may not have considered. Erick provides his clients with a year-end tax plan, which examines their tax year, details their current position with the various government agencies and describes opportunities for the upcoming year from both a tax and business perspective.

Contact Erick to discuss additional business deductions and credits at 214-635-2541. 

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: General Business