A tax deductible expense is any necessary, reasonable and ordinary expense that is associated with earning business income. As you can imagine, this definition is highly volatile. It is really important that you know about all the business expenses that are tax deductible. This would help you to save a lot of money on taxes. In this post we outline common business expenses that are tax deductible.
Unfortunately, most business managers do not know what expenses can be considered as being tax deductible. That is why we will go through those that many do not know much about.
Administrative And General Expenses
Basically all of the expenses that are necessary for business operations are tax deductible. This includes what you would expect: salaries, supplies, equipment, office rent, utility costs, accounting services, business publications subscriptions and professional dues. Such expenses are usually covered but there are so many others that are associated with administrative or general expenditures. For instance, you can actually deduct content writing tools and investments done in setting up a business office.
Make sure that you talk with your tax accountant. Mention the different expenses that will appear and see if they are going to be deductible or not. You will quickly figure out that even miscellaneous expenses like repairs, charitable contributions or education expenses can be deducted.
Keep in mind that home office deductions can be quite substantial. You gain many different advantages when you run an office from your home so do consider the opportunity as one that can help you to save a lot of money.
When doing business, you can easily have situations in which you drive a car. The business related mileage can be tax deductible, unless the automobile was used to commute from and to work. In the event that the travel was made with a business purpose that can be proven, tax deductions are available. Besides mileage, you can also deduct part of the expenses associated with car operating costs.
Travel And Entertainment Deductions
Reasonable entertainment and travel costs can be tax deductible when:
- They are directly connected with business
- They are associated with business
Due to the personal element that appears, only around 50% of the entertainment expenses and meals will be deductible.
Based on Internal Revenue Code, the small business owner can write off up to $18,000 of purchased equipment during one year period. It is a tax break that you do want to take advantage of as soon as possible, especially in the event that you often find yourself buying office related equipment.
Employee Benefit Deductions
These are highly valuable for business operations. Offering employees fringe benefits is actually tax deductible, which is many that do not know about. Many of such benefits are not seen as employee income. Tax breaks are thus available. The only problem is that there are many different deductions that appear and disappear. Tax laws change constantly so you need to be ahead of the curve.
We should also add that retirement plans chosen can also lead towards various tax advantages. Employer contributions are normally tax deductible and such money can be tax-deferred till retirement age is reached.