4 Common Tax Deductions for Small Business Owners

Small businesses are challenging to run. According to the U.S. Small Business Administration, it takes an average of $3,000 to start up a small business and another $1,000 to $5,000 a year to pay administration fees. After adding on simple costs such as materials, bills, employee salaries, etc., you are swimming in expenses.

Finding tax deductions for small business operations is essential to help save money. Numerico, a CPA near Royal Oak, MI, is an expert at digging through paperwork to ensure your business is saving as much money as possible when tax time rolls around.

How to Find the Right Deductions for Your Business

There are some easy deductions you can check off the list, such as travel and repairs related to your business. If you can prove that you were traveling for work and keep your receipts, for example, this is a perfectly acceptable tax deduction.

Other deductions, such as qualified business income and debt interest, are a bit harder to navigate. Save yourself the headache of tax preparation and planning at the end of the year by hiring a professional accountant to maximize your time and deductions.

Your Home Office

If you work from home regularly, the good news is that tax deductions are available for you. Be careful! Not all home office setups count toward a tax break for small businesses.

The IRS recognizes home offices as part of small business expenses. The home office tax deduction applies to those who have dedicated a home office entirely to their work. Other expenses that count toward the deductible include repairs, utilities, and insurance.

The simple answer to how this deductible works is that small business owners can deduct $5 per square foot of office space. The IRS caps that number at 300 square feet. To see if you qualify for this tax deduction, find an expert CPA to evaluate your situation.

Salaries & Employee Benefits

Believe it or not, the IRS counts paying your employees as a small business expense. Salaries, bonuses, contributions to retirement plans, and employee benefits programs, all count as tax-deductible.

If your small business outsources some work to freelancers, this also counts as an expense and, therefore, a deductible. Keep in mind when contracting independent labor that you have to issue a MISC-1099 form to any freelancer that you paid $600 or more in a tax year.

Unfortunately, the salaries and employee benefits tax deduction does not apply to all small businesses. If you are a sole proprietor or partner, your salary does not count as an employee salary.

Some employee salaries qualify for a tax credit rather than a deductible. Remember, a tax deduction is not the same as a tax credit. Read more about the difference between tax deductions vs tax credits here. An experienced CPA knows the ins and outs of credits and deductions, so having one on your side at tax time helps you find savings throughout your tax return.

Advertising Expenses

The IRS is well aware that small businesses must advertise their services to obtain new clients. Advertising expenses from billboards to social media advertisements all count as tax-deductible expenses.

Whether your small business prefers to post paper ads in the newspaper, billboards, or only online advertising, the IRS also recognizes these expenses as part of the advertising deductible.

Finally, if you are hanging flyers or handing out business cards, that expense also counts. Even having a freelancer design your logo or an expert helping you with persuasive marketing will count, but to make sure you deduct everything, it’s best to schedule a consultation with a professional accountant. 

Hire a Pro | Tax Deductions For Small Business Owners | Numerico PC

Still unsure about the tax deductions for small business owners? Hire a professional accountant to help with everything from tax deductions to multi-state tax compliance. Not only is this another tax-deductible service, but qualified CPAs confidently answer your tax-related questions and make the process as smooth as possible.

If you are looking for Michigan outsourced accounting services, look no further than Numerico. Our CPAs take pride in providing accurate, timely, cost-effective service tailored to every client. We are an accounting firm with serving Livonia, Plymouth, Canton, Farmington Hills, Ann Arbor, Westland, and the surrounding Michigan communities.

Contact us at (313)278-8030 and set up your consultation today!