For most business owners, tax season can be a stressful time. With so many complex rules and regulations, it’s easy to miss out on deductions that could save your business thousands of dollars. To help you get the most out of your taxes this year, Troy Renkemeyer lists the three most common tax deductions businesses tend to overlook.
Home Office Deductions
If you use a portion of your home for your business (e.g., an office or workspace), you may qualify for the home office deduction. This deduction is extremely valuable because it allows you to deduct a portion of your rent or mortgage and utility expenses as long as they are related to the space used exclusively for your business.
To take advantage of this deduction, ensure you have accurate records of all receipts related to the space in question (e.g., rent payments and utility bills). In addition, if you claim a portion of your home as an office space, make sure that it is used exclusively for work-related activities, not personal activities such as watching television or playing video games.
Health Insurance Premiums
If you provide health insurance coverage for yourself or your employees, these premiums may be deductible from your taxable income. This means that if you pay $10,000 in bonuses each year, then $10,000 will not be taxed at the end of the year. It’s important to note that only premiums paid by businesses are eligible for this deduction. Dividends paid by individuals are not qualified.
Be sure to keep accurate records and receipts related to any health insurance premiums paid throughout the year to maximize this deduction when filing next year’s taxes.
Travel Expenses
Travel expenses—including mileage reimbursement—are often overlooked by business owners looking to maximize their tax deductions, but they can be precious in reducing taxable income each year. In addition to traditional travel expenses such as hotel stays and airfare, businesses can also deduct other costs associated with travel, such as meals and entertainment (e.g., tickets to sporting events).
Be sure to keep detailed records when traveling on behalf of your business so that all costs associated with travel can be accurately tracked and claimed when filing taxes next year.
Other Common Deductions
Business owners can also take advantage of these deductions:
Employee Benefits
Aside from health care contributions, businesses can use other employee benefits as deductibles, such as retirement plans and education assistance programs. These contributions are deductible regardless of whether the benefit is paid for by the employer or by employees via pre-tax payroll deductions. Furthermore, businesses may also be able to deduct expenses related to providing meals and lodging for employees. For example, if an employer pays for an employee’s housing costs while away on business trips, those costs may be deductible as long as specific IRS rules are met.
Startup Expenses
Many startup expenses—such as legal fees and accounting services—are fully deductible in the year they are incurred. This can be especially beneficial for businesses in their first year of operation. Even if your company has yet to profit, you can still deduct these expenses and lower your taxable income accordingly. Also, additional startup cost deductions may be available depending on where your business is located. Check with your state government or local Small Business Administration office to find out what incentives may be available in your area.
Conclusion
Troy Renkemeyer says as a business owner, it pays to know what kind of deductions you can take advantage of come tax season. While there are many potential deductions, some common ones include home office expenses, health insurance premiums, and travel expenses, among others. By taking full advantage of all available deductions each year, businesses can significantly reduce their taxable income resulting in more money saved at tax time every April 15th.
