Five common small business tax deductions

Many of the purchases you make to run your small business will qualify for tax deductions. This is one simple, but sometimes overlooked, way to reduce your income tax bill each year. Also known as a tax write-off, tax deductions are expenses you've acquired to run your small business.

While keeping track of write-offs can significantly lower the amount of taxes they need to pay back, many business owners bypass the smaller expenses that can actually add up significantly. Make sure you're taking full advantage of your small business tax deductions with these five common write offs.

1. Utilities. If you have an office space, you're able to write off both the rent of the office as well as the utility bills of the place. This can include electricity, water, gas and trash costs.
2. Auto expenses. Whether you use a specific company vehicle or your personal car for business purposes, you should be able to deduct a good amount of car expenses. You'll need to keep track of things like mileage to help differentiate what are business use costs and what are personal use costs.
3. Software and subscriptions. Software that helps your organization run can also count as a deductible. This can include project management software, payroll software or creative platforms like Canva or Photoshop.
4. Business entertainment. According to MarketWatch, your business can deduct 100% of meals and possibly 100% of entertainment costs for employees or business partners. This means that if you buy lunch and drinks for your office before the holidays, you can keep the receipt and deduct the appropriate amount when filing your business tax deductions.
5. Employee gifts. This is an often overlooked write-off for business owners. FreshBooks notes that you can typically deduct up to $25 in gifts per employee each year. Keep in mind that gifts can exceed $25, but you'll only be able to deduct that amount from your taxes.

It's important to keep track of small business purchases throughout the year.

With so many responsibilities, entrepreneurs often don't take the time necessary to track all of their business expenses throughout the year or sit down to go through everything during tax season. To make things easier on yourself, get into the habit of bookkeeping. You can stay on top of your deductions yourself with bookkeeping software, or hire out someone to do this for you.

Finally, a bonus small business tax deduction is your legal and professional fees. If you hire a legal professional to help you work through business matters, you can deduct 100% of their fees. The attorneys at the Law Offices of Donald W. Hudspeth, P.C. practice business law exclusively and can represent you in times of need. Contact us today to learn more about our services.

Categorised in: Starting a Business in Arizona

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