The words Tax Deduction are words every small business owner has heard thrown about a thousand times, your ears pricking every time they are used. Unfortunately, though, trying to reduce the impact taxes have on your operation can be immensely daunting. But unfortunate or not, every small business needs to know how they can reduce their tax liability. Period. You need to know what the benefits are and how to reap the benefits because no matter what sector you operate in, saving money is a priority.
Home Office Deduction
Most entrepreneurs and business leaders have a place in their home that is used as a home office. It could be what was once the spare bedroom or perhaps you had the garage converted. It doesn’t matter. The point is, if you use part of your home to do business then you could be entitled to deduct a portion of your expenses. Mortgage payments, insurance, utility bills etc. Well worth checking out if you ask us.
Section 179 Deduction
A lot of people will tell you to recover the cost of business purchases over a period of time using depreciation deductions, but we prefer Section 179 deductions. This is because Section 179 allows you to recover the entire cost of equipment and property up to a total value of half a million dollars that you bought for your business the same year that you paid for it. That’s far more attractive than having the deduction spread out over the course of a decade.
401k Tax Deduction
More and more small businesses are switching their 401k plan providers and to save more on taxes, and rightly so. This is because not all businesses are the same and they’ve realized their plans should reflect that. That is why you should seriously consider going to a provider that can create a custom plan to suit your company, while also ensuring you and your employees get the most beneficial plan, especially in terms of a tax deduction.
Anyone that has been through the process of starting a business will know that it is expensive. If you’ve just experienced this, then we have some good news because the IRS offers a tax break that allows you to deduct up to $5000 of your startup costs in the first year of business. This can then have a knock-on effect that will reduce your taxable income, including things like Social Security payments and Medicare. If you are wondering what constitutes as start-up costs, they are things like buying equipment and supplies and expenditure on operational costs.
That’s right. You can deduct 50% of any meal that is considered to be business related. Obviously, you don’t want to take the mick, which means treating your lunch expenditure as if it were your own money. But taking a client – or even a potential client – out to lunch, or buying a food for your employees would constitute as lunch tax deductible. We just thought you would quite like to know about this one.