It’s Raining Money: Top Business Tax Deductions [FREE CHECKLIST]

tax deduction checklist

If there is one thing you always need to remember as a small business owner, it is this: you don’t mess with the Internal Revenue Service (IRS).

While the thought of “stretching the truth” may sneak into your mind, don’t let it linger for too long. You need to be 100 percent accurate and honest when filing your taxes, as this will keep you in good standing with the IRS, as well as state and local tax agencies.

But that does not mean you should sell yourself short. You have the right to take a variety of tax deductions, all of which can save you money.

Before we go any further, remember this: you won’t qualify for every tax deduction detailed below.

Related Article: 13 Genius Tax Write-Offs You Need to Take Advantage Of

1. Home Office

If you work from home, the home office deduction is one you should never pass up. As long as the space is devoted to your business, and nothing else, you can take the deduction.

Calculate your deduction by measuring the space you use for business and dividing it by the square footage of your home. From there, let your tax professional take over.

2. Office Supplies

Do you purchase stamps on a regular basis? How about computer ink? What about printer paper? You may not think you spend a lot on office expenses, but don’t hesitate to keep track. You could be surprised at what you find when you tally the numbers at the end of the year.

3. Equipment

Depending on your business, this may not be an annual expense. However, there will be times when you need to purchase equipment, such as a computer, printer, scanner, or furniture.

Tip: you have the option to deduct 100 percent upfront, or you can depreciate the item over the course of five years. Discuss which strategy is best with your tax professional.

4. Software

In today’s day and age, a growing number of companies are relying heavily on software. An example of this would be Salesforce, used primarily by your sales team.

If you spend any money on software, either as a one time cost or recurring subscription, you can claim the expense as a tax deduction.

5. Mileage

For many businesses this is a big one. If you drive your vehicle for business purposes, the IRS doesn’t mind if you take a deduction. But here is the catch: you need to keep sound records, such as writing down the date, mileage traveled, odometer reading, and any miscellaneous costs (such as tolls and parking fees).

For 2016, the standard mileage rates are as follows:

  • 54 cents per business mile driven.
  • 19 cents per mile driven for moving or medical reasons.
  • 14 cents per mile driven when providing a charitable service.

As long as you keep track of every mile you drive, you can fall back on this if the IRS comes knocking.

6. Travel

Do you find yourself traveling often for business? In addition to the mileage tax deduction, there are other travel related deductions meant to save you money.

For example, the entire cost of your hotel accommodations is tax deductible. Along with this, you can deduct 50 percent of any money spent on food while traveling.

Just the same as mileage, good records are of utmost importance. The best thing you can do is keep all your receipts in a safe place.

7. Entertainment

Every now and again (or more regularly) you may find yourself entertaining a client, prospect, coworker, or employee. In this case, you should be keeping track of all your expenses.

Did you spend money on a fancy meal? If so, you can write-off half the bill as an entertainment expense.  

8. Insurance Premiums

More people than ever before are taking the leap into self-employment. There are many benefits of this work arrangement, but it also comes at a cost.

As a self-employed professional, you are responsible for paying your own health insurance premiums. While this may be a nice chunk of change out of your pocket, you can get some of it back on your taxes.

Here is what the IRS has to say:

“The deduction is for medical, dental or long-term care insurance premiums that self-employed people often pay for themselves, their spouse and their dependents. The insurance can also cover your child who was under age 27 at the end of 2012, even if the child was not your dependent.”

As you can see, this deduction is for more than health insurance. It also comes into play for dental and long term care premiums.

9. Advertising and Marketing

It will be difficult (but not impossible) to grow your business without advertising and marketing expenses.

Some of the most common forms of advertising and marketing expenses include: online advertising, business cards, yellow page ads, billboards, and promotional items.

Just the same as many other categories, once you begin to keep track of advertising and marketing expenses you may be surprised at how much you are spending.

Tip: use the data from this expense category to calculate your advertising and marketing return on investment (ROI).

10. Inventory

Do you manufacture your own products? Do you purchase products for resale? If so, you cannot afford to overlook this tax deduction. By deducting the cost of goods sold, you can greatly reduce your tax liability.

Have You Missed Out in the Past?

Let’s face it: there is a good chance you have missed out on one or more tax deduction in the past. This may hurt to admit, but it’s better to realize your mistake than to continue hiding from it.

These may not be the only tax deductions your business qualifies for, but they are among the most common. 

Business tax deduction checklist

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