If you run a small business or you are planning a new start-up, then you need to know the ins-and-outs of tax deductions for start-up businesses as well as small business tax deductions that may be relevant to your company. Tax deductions can help you manage your business financials by lowering your taxable income to more manageable levels. Let’s take a closer look at what small business tax deduction means for your business as well as the most common tax deductions for new start-ups and SMBs.
Tax Deductions for Small Business Owners You Shouldn’t Overlook
Tax deductions are business expenses that fall under a defined, specific frame which allows you to deduct them from your business’ taxable income. The more deductions, the lower your taxable income, and the lower your tax bracket.
When it comes to small business tax deductions, the more important thing you need to know is that there is a surprising amount of them. Many people do not realize that they could be deducting plenty of these business-related expenses each year, helping them to lower their taxable income and save money, which is especially vital for start-ups and SMBs that have less financial leverage.
Here are 3 of the most common tax deductions for smaller businesses and start-up companies.
If you have to use your personal vehicle for any business-related travel, you can actually claim the business part of your vehicle usage as a deduction. This will typically involve deducting your actual business travel expenses (such as gas costs for a business trip to another state) or by using the IRS set rate for business mileage.
Most of the expenses of business travel can be included in tax deductions; this includes not just practical items such as the cost of plane tickets or hotels, but around 50% of the cost of meals and business entertainment, such as taking out a client to dinner and a show.
You can claim a significant portion of your start-up costs as a tax deduction; as of 2020, you can claim up to $5,000 of business start-up expenses and up to $5,000 of organizational costs
As a small business or start-up owner, it is in your best interests to file for as many relevant tax deductions as possible to reduce your taxable income. Contacting a tax professional will help you save the most money and file for the right deductions.
Schedule a free consultation today with our experienced certified public accountant to help you improve your tax and financial situation.