Business Tax Deductions for Small Business Owners

Author: Jeff Bachus, Director, SBA Lending 07/01/2021

Filing taxes can be a tedious process for small business owners, but it can pay off to understand some of the available tax advantages. The IRS allows small businesses to subtract certain business expenses from their taxable income in the form of tax deductions or tax-write-offs. Some of these business tax deductions could help your small business save money by pinpointing expenses the Internal Revenue Service (IRS) qualifies as tax-deductible. The following are items that may be tax-deductible for your small business.

Home Office

 The IRS recognizes that many small businesses can function successfully from the owner’s home, rather than a free-standing property or location. Some small business owners who carry out business from their homes may be eligible to deduct a percentage of expenses associated with home business use, including mortgage interest, utilities, and repairs. To qualify for a home office deduction, you must have a designated part of your home, such as an extra room or a garage, that is used exclusively and regularly for your business. It must also be the principal place from which you run the business.

Business Vehicle

 If you use a personal vehicle for your business, you may be eligible to deduct car expenses from your taxable income. The IRS will ask you to divide your expenses based on your recorded business-related vehicle mileage. Car expenses that may also be eligible can include depreciation, repairs, maintenance, and registration costs.

Travel Expenses

 If you travel for your business, some of those expenses can be tax-deductible, including air, vehicle, and train fares, parking fees, laundry and dry cleaning, lodging, and meals. The IRS allows you to deduct business-related travel costs if you are traveling outside of your tax home, meaning the city or general region where your business is located.

Rent on Business Property

In many cases, the amount you pay to rent property, office space, and equipment for your business is tax-deductible. However, rent expenses cannot be subtracted from your taxable income if you own any percentage of the property.

Office Supplies

The office items you use to keep your business organized and carry out day-to-day administrative activities are likely eligible for a tax deduction. And while office supplies may not be a large expense for every business, deducting those costs could still save money. Even shipping and postage costs to sell or distribute inventory could qualify, providing potential benefits to many of the businesses that operate virtually or online.

Advertising

If you’ve invested in advertising or promotional activities, some of those associated expenses may be tax deductible. These could include the cost of branded stationery, brochures, digital or print ads, local sponsorships, and more. The IRS allows small business owners to subtract advertising costs from their taxable income if the expenses are distinctly meant to encourage customers to purchase their products or services.

Insurance for Your Business

The costs of purchasing insurance policies that protect your business are typically tax-deductible. Although it’s important to reference the guidelines set by the IRS to understand when and how much of your insurance premiums can be deducted.

Proactively classifying and keeping track of expenses for your small business can help you save money and time. Learn how PlainsCapital Bank’s small business solutions can help you stay on track.

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