What Types of Tax Deductions Are Available for Small Businesses?

 Posted on October 17, 2022 in Small Business Taxes

As a small business owner, it is important to be aware of the various tax deductions that are available to you. Taking advantage of these deductions can help reduce your tax liability, leaving you with more money to reinvest in your business. By working with a tax law attorney, you can determine the best ways to minimize your tax burden and ensure that your business will be able to continue operating successfully. 

Tax Deductions for Business Expenses and Other Costs

There are multiple types of expenses that small business owners may be able to deduct from their taxes, including:

• Startup costs - A business's capital expenses may address the costs of starting a company. Deductions may be available for the costs of founding or acquiring a business, and these may be amortized over several years after a business is founded.

• Operating expenses - These may include costs such as rent, utilities, advertising, software subscriptions, and other general expenses necessary to keep a business running. A person who operates a business out of their home may be able to deduct various home office expenses, including mortgage interest, homeowner's insurance, and maintenance or repairs.

• Equipment and property - Businesses can deduct the cost of equipment and property that is used for business purposes. This may include vehicles, furniture, office supplies, and machinery. Deductions may also be available for depreciation of equipment and machinery.

• Cost of goods sold - A small business owner who sells products may be able to deduct the cost of the materials used to create those products, including purchasing raw materials, shipping and storing items, and other expenses related to the production of goods.

• State and local taxes - Certain types of taxes, such as property taxes, state income taxes, sales taxes, and the employer's share of unemployment taxes, may be deductible from a business's federal taxes.

• Employee wages and benefits - The cost of salaries, bonuses, and other forms of compensation paid to employees are generally deductible. A small business owner may also be able to deduct the costs of employee health insurance, retirement plans, and other benefits.

• Interest - Businesses may be able to deduct interest on loans used for business purposes, such as a mortgage or line of credit.

• Travel expenses - A small business owner may be able to deduct expenses such as airfare, hotel stays, and rental cars for travel related to business. Deductions are also available for mileage traveled when using a vehicle for business purposes.

• Meals and entertainment - A small business owner may be able to deduct the cost of business-related meals and entertainment, such as taking a client out for lunch or attending a business conference.

• Bad debts - If a small business is owed money by a customer or client, and these debts have not been paid, the bad debt may be deducted as a business loss.

Contact Our San Jose Small Business Tax Lawyer

As a small business owner, it is important to be aware of all the tax deductions that are available to you. Taking advantage of these deductions can help reduce the amount of taxes you will be required to pay, ensuring that your company will be able to maintain ongoing success. At John D. Teter Law Offices, we can advise you on the steps you can take to maximize your deductions, and we can help you address any other tax-related issues you may face. Contact our San Jose, CA small business tax attorney at 408-866-1810 to get the legal help that will allow your business to succeed.

Sources:

https://www.nerdwallet.com/article/small-business/small-business-tax-deductions-guide

https://www.score.org/resource/10-most-common-tax-deductions-small-businesses-might-miss

https://www.irs.gov/publications/p535