Small Business Taxes: 10 Deductions You Need to Know About

by | Feb 2, 2022 | Business Finance | 0 comments

Tax time is upon us. For small business owners, finding deductions is key to helping them keep their tax bills manageable. There are many small business tax deductions that entrepreneurs aren’t necessarily taking advantage of—either they are unaware of such deductions, or they aren’t keeping comprehensive enough records to go back and identify relevant deductions. This is why detailed recordkeeping for small businesses, particularly when it comes to taxes, is so crucial. So, what deductions might you be missing? How do you make your small business taxes less of a burden this year? Below are 10 small business tax deductions that your company might just be overlooking.

1.Inventory. You are trying to arrive at the cost of goods sold; this number considers the price of the products, storage of stock, relevant labor costs, and any factory or warehouse overhead. If you are, in fact, an inventory-based business, then you may be able to deduct the cost of that inventory. You have to assign a value to the stock at the beginning and end of that tax year to do this correctly.

2. Business rents. If your business rents property from which it conducts business, you can deduct this rent from your taxes. Also, if your business is home-based, the IRS will allow you to deduct certain home business expenses; such expenses include a percentage of your mortgage or rent, utilities, insurances, depreciation, and appropriate repairs.

3. Office supplies. You can deduct everyday office supplies from your taxes, from pens to staples. Yes, these may at first glance be small expenses, but over time and the year, they certainly can add up. This is where keeping careful track of all that you buy for use in your business becomes increasingly important—the more thorough your records, the better.

4. Subscriptions. Often, small businesses will have a few different subscriptions to facilitate business operations. So, for example, if you have downloaded software and pay a monthly fee for the use of that software, this is deductible. You will claim this expense on your Schedule C form.

5. Travel expenses. For those business owners who are regularly traveling, deducting expenses associated with any relevant travel is beneficial. Generally, such travel expenses will include airfare, Uber and taxi fare, hotel expenses, and other related travel costs. On the IRS website, you can find more details about what exactly is considered a deductible expense where travel is concerned.

6. Marketing. Every small business likely does some form of advertising and marketing. The money that you spend to market your company can be deducted. For instance, if you pay to have business cards created, you can deduct this expense. Hiring a graphic designer to develop a new logo for your company is also a deductible marketing expense.

7. Employee salaries. The money that you pay your employees is deductible. However, this will depend upon the type of business entity you are. A sole proprietor generally cannot deduct employee wages. Be sure you understand the nuances associated with employee salary deductions.

8. Legal fees. If, for whatever reason, you need to hire a lawyer or legal professional for your business this year, you can deduct their fees from your taxes. Again, this is where keeping careful records becomes imperative. Make sure you have all invoices, bills, and receipts on file.

9. Office furniture. Generally falling under the heading of office supplies, furnishings for your office can be deducted. Seating for a workplace, desks, a waiting room sofa, a coffeemaker, all of these is legitimately deductible expenses.

10. Mileage. If you travel for work and use a vehicle to do so, you can deduct the mileage traveled while doing business. The IRS provides a standard mileage rate. It would be best to keep a log of how far you have traveled for business purposes only. Be sure to separate personal mileage. Keeping a record will enable you to get an accurate account of the total annual miles traveled that you can then deduct come tax time.

First Union Lending Wants to Help

We offer a variety of loan programs for small businesses across the US. If you need additional working capital for any reason, expansion, hiring more staff, a new marketing campaign, or just to weather a difficult financial period, we have a solution for you. Call today, and let’s get started.

See your loan options

Only U.S.-Based Businesses are Eligible