Managing a small business is complicated. Managing and keeping track of all the deductions you are entitled to can be even more so. You are not alone. According to Kiplinger, millions of individuals overpay on their taxes each year. Below are a seven small business tax deductions that either you may have missed or are not optimizing. It’s not too late to incorporate these into your 2015 tax preparation, as long as you know what to look for.
- Auto Deductions
If your work takes you away from the office, make sure you are keeping track of travel expenses. Don’t assume that the Standard Mileage Deduction (57.5 cents/mile for 2015) is your best bet: You should add up all actual car-related expenses, multiplied by the percentage of business use, and calculate which gives the largest deduction for you. If it was a year for large repairs, new tires, and more, the actual expense approach may be the better option.
- Travel Deductions
If you are headed out of town for a business trip, be sure to keep all your receipts. Most of the costs of your trip are fully deductible, with the exception of meals and entertainment (50%). Don’t forget fees you might not normally think of, like airline baggage fees, meals eaten while traveling, tips paid for services, or dry cleaning.
- State Tax Deductions
As a small business owner, you have the choice as to whether you want to deduct State Income Tax or State Sales Tax on your Federal return. This assumes that you live in a state with a state sales tax. Compare the two, and see which will give you a larger deduction – you may be surprised.
- Bad Debt Deduction
As a small business owner, you might unfortunately encounter a customer or other business that won’t pay what they owe you, no matter how many times and how hard you try to collect. You must keep track of goods or services rendered, and what you did to try and collect the debt if you are going to take this deduction. For more information, refer to the IRS Publication 535 – Business Expenses.
- Charitable Donations
It’s not only good for your business and community to participate in charitable donations, it can be good for your taxes, too. Businesses can write off between 20-50% of their gross income in charitable deductions, although most don’t rise to that level of giving. Make sure you keep your receipts, and if you are giving goods and/or services, you can deduct the cost to you, not the retail value.
- Lifetime Learning Credit
Whatever classes you want to take to enhance your business, you can deduct 20% of the first $10,000 in expenses per year, up to $2,000 per year. The school you attend must be accredited in order to qualify for the deduction. You can also deduct the cost of business-relevant subscriptions to online and offline publications, manuals and books.
- Start-up Expenses
Is this your first year in business? You are allowed up to $5,000 of start-up expenses, which include any money paid in connection with creating an active trade or business.
These are just a few of the many deductions you are entitled to as a small business owner. To maximize your deductions and make sure you only pay what you need to Uncle Sam, you may want to consider using the services of a professional tax consultant. An experienced tax consultant can not only uncover these often-overlooked tax deductions, but also help you proactively plan your expenditures through future tax years, so that you can maximize your deductions and keep more of your hard-earned cash in your pocket. And remember, you can deduct the cost of hiring a tax professional - not only for tax preparation, but also any costs associated with tax planning advice, and tax or legal representation and counsel.
All content posted on this website or distributed by PADGETT BUSINESS SERVICES® is intended for informational purposes only. To determine whether these concepts are appropriate for your business, you should seek advice from a PADGETT BUSINESS SERVICES® representative or an independent advisor before implementation.
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