If you’re the owner of a small business, trying to get prepped for your taxes can be a baffling time and while it’s often advisable to hire the services of tax professionals to help you sort them out, it’s also a good idea to have at least a basic knowledge of your own. Knowing how to save money through tax deductions can be extremely helpful, and below are a few pointers to set you going in the right direction:
- Claiming deductions for your home office:
If you can prove that your tax deductions are legitimate, then there is no reason why you shouldn’t claim them, even if they are linked to your office which happens to be in your home. It’s all just a case of organizing your records properly, and being able to prove that your expenses are for your business.
Ensuring that your office space is clearly that, as opposed to a desk shoved into the corner of your bedroom, or a tiny area in what is otherwise the kid’s playroom, will help greatly.
Dedicating a PC or laptop to your business is essential, as if the kids are using it to Google the answers for their homework, then it will be clear that it’s being used for more than just your business.
You will also be able to deduct a certain percentage of home expenses for your business, and this can be calculated by measuring your work area/office and dividing it by the square footage of your home. What you are left with is the percentage of rent, mortgage, taxes, maintenance and utilities that you can claim.
- Claiming deductions for technology
If you purchase new technology for your business (a computer, printer, or business related software), then this will be tax deductible up to a certain amount. The full cost can be deducted on the year of purchase, or over several years. The amount that you can deduct will often change though, so it’s wise to make yourself aware of the current limitations under section 179 before making your claim.
A company car may also be tax deductible, but it must be a vehicle that is used strictly for business purposes.
Business related magazine and website subscriptions are fully deductible, too.
- Claiming deductions for travel expenses
Many travel related expenses are completely tax deductible, but if you travel with your family alongside you, then you must ensure that you only claim for yourself and only for business related expenses.
- Meals
Meals with clients are 50% deductible, but it’s a good idea to make a note on the receipt as to the purpose of the meal, just in case you are asked to provide evidence to the IRS.
- Conference fees
If you attend a conference that is directly related to your business or industry, and which was of genuine use to you in business terms, then any fees incurred would probably be deductible.
Perhaps the most important thing to remember when thinking about tax deductions for your small business, is to keep detailed records of all purchases, and hold on to every single receipt; while it may seem like a lot of effort to begin with, it will prove its worth when you’re trying to file your tax return, and especially if your business is subjected to an audit.
If in doubt, simply call in the services of a tax professional, who will have a much clearer picture of what is and isn’t deductible, plus up to date knowledge of all the relevant tax laws and regulations for your state.