Utilize the Tax Deductions Available to Small Business Owners.
As a business owner, you should utilize any tax deductions that may be available to lower your tax liability (and, as a result, boost your tax savings!). Here is a brief overview of tax deductions that may be available to small business owners in case you are unsure what qualifies as one. Furthermore, you must contact a CPA in Nashville, TN.
Typical deductions
Yes, taxes are deductible for tax purposes. Sales, business, and real estate taxes are all deductible. State unemployment taxes, FICA, and FUTA are also deductible.
- Insurance: Although you may resent paying the high expenses of company insurance, they may save you money on taxes. Among the costs that qualify as tax deductions are those for your health insurance, auto insurance, business interruption, and continuation insurance, workers’ compensation, and general liability insurance.
- Depreciation—Remember that you can claim a tax deduction for the depreciation of your equipment, furnishings, and other business assets. You can utilize various techniques; consult your accountant to determine the most effective for you.
- Costs associated with renting and leasing premises for your business are tax deductible. The same goes for leasing expenses for office supplies like copiers and machinery. Remember that the circumstances are different if you operate your company from a home office. Once more, your accountant can assist you in determining which deductions apply to which tax return (personal or commercial).
- Employee compensation and benefits: As long as each individual is a confirmed, recorded employee of your business (this exclusion does not apply to sole proprietorships or partnerships), you may deduct the annual salaries and hourly wages that you pay to your employees. Some benefits, including accounts in eligible retirement plans, child care subsidies, and educational financial aid, are also deductible. For more information, talk to your accountant.
- Contractor compensation is tax deductible if you hire independent contractors or freelancers. For payments of more than $600, you must send them a form MISC-1099 or 1099-K in order for them to be qualified for that deduction.
Other conceivable deductions
Although we will not go into detail in this part because the subsequent deductions—conditions for deductibility, documentation requirements, etc.—can be more complicated, this list may help your accountant (say it with us) think of additional questions. These deductions consist of the following:
- Interest costs for business credit cards, microloans, company lines of credit, and mortgage loans
- Unpaid invoices, employee loans, and receivables are examples of bad debts.
- Organizational and startup costs
- Tax credits for research and development (R&D)
- Expenses for marketing and advertising
- Contributions to retirement plans