Tax season is never our favorite time of year. However, it’s necessary. Like many people say, only 2 things that are certain in life, taxes, and death. We’ve combed over tax codes and spent hours of research to bring you what we think are the best small business tax deductions that you can apply. Even if you’re running a corporation or manufacturing factory, here are our suggestions to minimize your tax liability. (Also See: Section 179 tax incentives). These apply to sole proprietors as well as companies incorporated.
Heres some deductions we think you should apply:
Deducting wages you’ve paid to independent contractors
The salary that you pay to yourself isn’t directly deductible. However, anything you pay to employees and independent contractors is applicable to be deducted. As long as you’ve issued the correct documentation to employees (See 1099 rules), you shouldn’t have any problem deducting their wages.
Deducting your home office
There are a few important points to remember when adding the home office as a deduction to your taxes. In order to take advantage of this deduction, you must have an area of your home which is exclusively used for business activities, this means that you cannot have any other purpose for it other than as your office. The easiest method to calculate your deduction would be to multiply the square footage of your office at $5/ft. It’s not easy to qualify for this deduction, however, if you do… it’s the most helpful.
There are other more complicated methods to calculate the amount you can deduct. It includes calculating your expenses like utilities, rent, mortgage, insurance and other bills. Read more about that here.
Using depreciation for a tax deduction is one of the most effective things you can do. It potentially allows you to change your entire fiscal year around. Consider using Depreciation as an allowance for the cost of buying assets for your business. (Visit Section 179.org to see how to qualify) With Section 179, you’re allowed 50% bonus depreciation so you can take advantage immediately.
Ensure you don’t allow any tax deductions to slip through unclaimed by planning. We recommend staying organized throughout the year so you aren’t surprised or taken aback. Don’t be like the 20% of small business owners that are affected by tax payments.
Let us know if you have any suggestions or recommendations to this list.