Common Tax Deductions for Small Business Owners

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Preparing for income tax season is one of the least favorable jobs a small business owner does.

Small business owners do not want to have to go back through a year of receipts and expense information to prepare income taxes; therefore, keeping your bookkeeping up to date helps when January rolls around.

You will need to keep records and receipts of all the tax deductions you take for your business.

The IRS website will help you determine how long you need to keep records.

Knowing what type of tax deductions your business can benefit from makes your business more profitable.

Tax deductions for your business will cut your tax liability.

Talk to your CPA or tax advisor when determining what tax deductions your business qualifies for.

Common tax deductions for small business owners help cut tax liability.  Work with your tax advisor to find tax deductions for your business.

A Tax Deduction Is Also Called a Tax Write-Off

The easiest explanation of a tax deduction is deducting expenses from your taxable income.

Tax deductions will vary based on your business entity and industry.


Advertising & Marketing

Advertising and marketing are tax deductions for a small business.

Examples of advertising and marketing deductions include:

  • Business Cards
  • Flyers
  • Social Media Ads
  • Google Ads
  • Sponsored Ads

Business Insurance

Deductible premiums used by small business owners are often tax deductible.

Types of business insurance deductibles are:

  • Auto Insurance for Business Vehicles
  • Group health, vision, and dental insurance for employees
  • Professional Liability Insurance
  • Professional Malpractice Insurance
  • Workers’ Compensation

Continuing Education

When education adds value to your business and enhances your expertise you can deduct the cost of your education. Guidelines on whether the IRS will allow you to expense your class, online seminar, and reading are below:

  • The class is in your field and improves your skills
  • The subscriptions are trade or publications and are professional
  • Books mold to your industry
  • Workshops, Seminars, and Webinars increase skills and expertise

Contractors

Did you know when you spend $600 or more to pay a contractor for the year you can expense the amount you paid?

Some common law rules that determine whether you are hiring a contractor are:

  • The employer does not control what the worker does or how the person does it
  • The contractor is required to pay his or her own self-employment tax
  • The employer does not provide a wage amount
  • The employer does provide a flat fee or hourly pay
  • Contractors generally do not receive benefits
  • Contractors normally work specific projects or periods

Let me remind you to sign up for my free Bookkeeping Simplified Guide. My Bookkeeping Simplified Guide includes free access to my method on how to put your bookkeeping on a schedule. 

Employee Salaries

Normally you can deduct the amount paid to your employees for services performed. The amount paid may include wages, salaries, bonuses, commissions, or other noncash payments like vacation or fringe benefits.

Deductions can take place if you meet the IRS conditions:

  • Services provided by the employee are actually provided by the employee
  • The salary is ordinary, reasonable, and necessary
  • The employee cannot be a sole proprietor, an LLC member, or a partner

Home Office

Did you work from home this year? Provide the dimensions of your home office to your tax advisor so you can deduct the cost on your tax return.

The IRS has two requirements for your home to qualify as a tax deduction

  • Your home office needs to be used regularly and exclusively
  • Your home office needs to be your principal place of business

Legal and Professional Fees

Common legal and professional fees you can deduct as a small business owner are:

  • Accountant Fees
  • Bookkeeping Fees
  • Licenses and Regulatory Fees Paid for your Business to State or Local Governments
  • Tax Preparation Fees

Related Topics:

Additional Tax Deductions Your Business May Qualify For:

  • Business Meals
  • Office Supplies
  • Rent Expense
  • Telephone, Internet, and Utilities
  • Work-Related Travel Expenses

8 Comments

  1. This is so helpful! I was just struggling through my taxes the other night…

    1. I’m so happy this information helped you!

  2. Good read! Thanks for all the useful information.

    1. Thank you for visiting my site!

  3. This is so helpful approaching tax season! Thanks for the useful tips!

    1. Thankful to be able to help others!

  4. Thanks for this handy guide to common deductions for small business owners. I totally agree that it’s no fun to have to sort through the receipts, but it sure beats unnecessarily paying extra taxes!

    1. Couldn’t agree with you more! Small business owners put sweat and tears into their business so receiving all possible deductions are important.

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