7 Tax Deductions Every SMB Should Take Advantage of Before the End of FY 2023

Do you have a financial plan intact for retirement? If so, you can use it as one of your small business deductions. Many business owners overlook the fact that retirement contributions can reduce tax liability. Up to 20% of self-employment income is typically eligible for this deduction. The deadline for setting up a SEP IRA is April 15 the year before the contributions, so you don’t want to delay setting up the retirement account. A 401(k) plan can be part of the deduction as a small business tax deduction. If you don’t have a retirement plan going, put it on your business tax deductions checklist 2023 “to do” list.

Most business owners realize they can deduct office expenses, but small business tax write-offs for a home office are not commonly utilized. Under the heading of small business taxpayer exceptions, a home office qualifies for tax relief. The IRS has set some rules regarding this write-off, like that the office must be in a separate room from the rest of the house but…how easy is that to bring to pass? The office must be used regularly. It must also house most administrative actions that take place within the small business. Many more people than ever before are working from home due to COVID-19, so it is vital to check into the IRS stipulations and what can be gained from claiming your home office to qualify for small business tax deductions.

Another item on small business tax write-offs is charitable contributions. You may not realize that you can take this as one of your small business taxpayer exceptions because you can’t on your business tax returns but you can on your individual tax return which serves the same purpose in the long run. You can take this if you itemize your deductions and they also allow for non-cash items to be deducted such as a vehicle, running or not.

There is a bonus deduction that you can get as a small business tax deduction if you have a first-year bonus depreciation due to you. The bonus depreciation is new and is available through the Tax Cuts and Jobs Act. It allows for 100% of all business property that qualifies to be deducted and if you have any leftover, it lets you deduct the following year but only if you take the option. It is ideal for a business that has a large amount of income from the year that needs to be offset with deductions.

If you have had contributions go into a qualified Health Savings Plan, or HAS, put it on your business tax deduction for 2023 or whatever year you are filing. The deduction is able to be used until April 15, 2023, and any taxpayers who contribute up until that date are eligible to claim it as a small business tax deduction.

If you retain employees, you’ll want to take advantage of these small business tax write-offs. This is a tax credit instead of a deduction and is one more way to reduce the amount you have to pay taxes. You can claim up to 70% of the wages of each of your full-time employees up to $7,000 per year. The only time you may not want to take this ERTC small business taxpayer exception is if you will be trying to secure a loan and your gross income will be taken into consideration because it lowers the adjusted gross income of your business.

If you travel for your small business, you will want to look into what you can and can’t deduct. Some meals qualify for a partial deduction and business expenses such as lodging and such. Only a portion will be deducted but may add up to a good bit in the long run.

As you are figuring out your tax for 2022-23, don’t forget to check into the seven deductions above to see if they are right for you to take…or not. Contact us for a free consultation today.