Small Business Tax Deductions You May Have Overlooked

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Small Business Tax Deductions You May Have Overlooked

December 5, 2014 | Jennifer Goodwyn

From utilizing the services of a virtual office and outsourcing legal or marketing to using recycled office equipment and hiring affordable talent, small businesses are always looking for ways to save money – but did you know you save money on taxes by simply being an entrepreneur? Whether you file your taxes on your own or have an accountant do it, there are several tax deductions that are exclusive to small business owners and entrepreneurs. Here's a few to look out for during next year's tax season.

Home Office Tax Deduction

To qualify for a home office deduction, you must use your office on an exclusive and regular basis. Essentially, it must act as your principal place of business or as the primary place you meet with clients. If you're concerned that claiming a home office for a deduction will send red flags to an IRS auditor, don't be – the chances of getting audited aren't greater with home-office deductions, especially since nearly 53 percent of small business operate from home. Deductions can include rent, mortgage, home improvement, utilities, maintenance, cleaning supplies, and anything else related to the home office.

Auto Expenses

If you use your car for your business, you might be able to deduct the costs of owning, maintaining, and operating your automobile. There are two ways to claim a ‘business automobile' on your taxes: you can deduct the business portion of the actual expenses you incur, or you can keep track of the miles you put on your car for business related purposes and multiply your total by the IRS standard mileage rate. In 2014, the standard mileage rate was 56 cents per mile; if you're interested in writing off your business mileage, check with your accountant for up-to-date estimations.

Startup Costs

Did you know you can actually write-off costs you incurred before you even opened your doors for business? Although you have to be currently operating the business in order to deduct the expenses, you can still deduct up to $5,000 of the startup costs, as long as you deduct the costs within the first year of business. If the startup costs exceeded $5,000, you may be able to gradually write them off over the course of fifteen years. Anything that exceeds $50,000 faces a certain number of limitations. You can get more information about this type of deduction on the IRS' website.

Business Travel & Meals

If you entertain present or prospective clients with entertainment and meals, you're eligible for a deduction of up to 50 percent of the related cost, as long as it's directly related to the business and business matters are discussed during the meal or entertainment outing. The same goes for travel – when you travel for business, you can deduct the total cost of plane tickets, taxis, lodging, and 50 percent of meals and entertainment costs. Other expenses, like dry cleaning and WiFi, may also apply. Don't worry about keeping receipts if the amount is under $75, the IRS won't need them as long as you keep a record of these costs. 


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