Small Business Tax Tips: 5 Tax Write-Offs You Did Not Know About
I shared a post on my Instagram page showing how much your income is taxed. If you, you will be shocked at just how much your money is taxed. It’s taxed several times as it passes through hands and transactions. Therefore, the only way to be safe from so many rounds of taxes is to ensure that you get some of the money back. As a small business owner, you can get this money legally by utilizing tax write-offs discussed in this article.
This article will discuss some of the deductions that are usually overlooked by small businesses. I understand that most small business owners quickly want to know more about obvious deductions such as home office expenses and office supplies. But there is more you can deduct and further reduce your business tax bill to very low levels or nothing at all – and it’s the focus of this article. This should be music to the ears because it adds more to what you can save on business taxes. The more you save on taxes, the more you have money to reinvest in your business and grow it.
What are business tax write-offs your business can utilize?
1. Cellphone Write-Offs
Indeed, your cellphone bill can save you thousands of dollars on taxes. Individual taxpayers may argue how much a cell phone can cost a person in any given year. However, there are no questions about the possible size of a business cellphone bill. Many of you running businesses understand this. It does not matter how small your business is – you got to be making calls at some point. You call clients, suppliers, and employees.
Cellphone costs you can write off include the phone itself, the case, the screen protector, the bill, applications that cost you money, especially the ones you use for business, and insurance. This is basically everything you pay for your cellphone, and it makes sense because a phone you buy to use for your business is a business asset. Nevertheless, if you run a business that does not use the phone all the time, make sure only to write off the percentage of costs you use for business.
You can also write off the internet bill. If you have a home office, you should deduct the business portion of internet costs.
2. Medical and dental expenses
Millions of self-employed individuals can benefit from deducting medical and dental expenses. This includes health, dental, and qualified long-term care (LTC) insurance premiums. However, you can only benefit from this if you are not already participating in a plan through your spouse’s employer.
3. Interest and banking fees
Your business has a bank account that attracts fees at the end of every month. If you took a business loan, the interest you pay on the loan is another cost of doing business. Therefore, the tax code allows you to deduct these costs from your business income, thereby reducing your taxable income.
If you got a loan that you used for both business and personal expenses, ensure that you calculate the portion you used for business and that which you used for personal. You will only be allowed to deduct interest on the portion of the loan you used for business. For example, if you borrowed $1,000 from the bank and used $600 (60%) for business purposes, it means you can only deduct 60% of interest costs for the loan.
4. Depreciation
I always get this feeling that many small businesses do not deduct depreciation. The primary reason for this is that many of you do not have accounting. As such, there is no way of calculating this depreciation without it. However, what is depreciation in this context? Depreciation is the monetary value attached to the wear and tear of a business asset as you use it. For example, if you buy a vending machine for $300 for your business, it will not stay valued at that $300 as time passes. So, depreciation captures the value being lost by the asset over time. When recording it in the accounting books, it will not always be its original $300. It will eventually be worth $100 at some point.
Deducting depreciation could be complicated for many small businesses, which is why you need a trained accountant to first do your accounting and then prepare your tax return. This is something you should strongly consider because your business benefits in several ways if you hire such professionals. I provide these services to hundreds of small businesses. You can also start your journey with me by visiting my Link Tree and clicking on the rightful buttons (Accounting/Taxes).
5. Startup costs
We can agree that many motivational speakers say starting a business may cost you nothing. But we know the truth – it will always cost you something. Most small businesses today are started online, and guess what? You use the internet by working online – which is a business cost. Therefore, find out how much you used when starting your business and deduct it from your return. It will save you some tax money.
You can read more about startup costs in this IRS article. If you also need more information about all the above points, or if you need accounting and tax services, contact us. We will gladly assist you.
Frequently Asked Questions
1. What are good write-offs for taxes?
There are no good write-offs for your taxes – all of them are. You must hire a trained tax professional to help you take advantage of all tax write-offs.
2. What deductions can you claim on tax without receipts?.
I would not encourage you to claim any deduction without a receipt. This will generally raise suspicions if the IRS asks about it, and you can’t prove it.
3. Are tax write-offs worth it?
Yes, they are worth the trouble. Tax write-offs reduce your taxable income, thereby reducing how much the IRS charges you for taxes.
4. Can you write off your car payment?
All car expenses that are directly related to your work are deductible. But if the vehicle is for personal use and you use it sometimes for business, you can only deduct the portion of expenses incurred while using it for business. This means that the overall car payment, in the latter scenario, cannot be written off.
