As the owner of a small business, you most likely have a running tally of the expenses that your business incurs on a day-to-day basis. However, when it comes to preparing your annual taxes, these expenses can start to get overwhelming. Tax planning for small business owners is inherently complicated. Therefore, it’s not unusual for business owners to miss possible deductions that can put money back in their pockets.
The best way for business owners to maximize their savings is to partner with a small business tax services provider that are adept at navigating all aspects of providing small business tax help. Meanwhile, when tracking your daily expenses, keep the following guidelines and deductions that may add up to great results when the April 2024 tax season rolls around.
Differences Between Business Expenses and Tax Deductions
First, it’s essential to note the differences between expenses and tax deductions. Anything you spend within your business qualifies as an expense, but not all expenses are tax deductions.
A deduction occurs when an expense can be subtracted from a business owner or individual’s taxable income, reducing the amount of taxes that need to be paid annually, quarterly, or in a given timeframe.
The Importance of Keeping Accurate Records and Documentation
Note that for all your expenses, you should have written verification that a particular transaction occurred, which is especially essential in the case of an IRS audit.
Supporting documents can include:
- paid bills
- sales slips
- invoices
- receipts
- canceled checks
- withdrawal or deposit slips
These should match your routine recordkeeping. It is excellent to simply keep this documentation in a single location and safe place. Additionally, the more organized these documents are (for example, categorized by year or the type of expense), the easier the small business tax planning process will be.
Top Small Business Tax Deductions
Remember that the following list is just a sample of the many expenses you may be able to deduct from your annual taxes. Our professionals at Waters Hardy can provide ample small business tax help for your unique situation. They can also ensure that every possible deduction in the operation of your business is accounted for.
Home Office
A home office has been one of the top small business deductions in recent years as the country shifts to a remote work environment. In order to claim a home office deduction, make sure the following requirements apply:
- The home office has clear boundaries and is a separate room from other areas in the home, like a bedroom or den.
- The home office is where you spend the majority of your time conducting work.
- The home office is not available for other uses, like an exercise or family room.
If these qualifications apply, you can deduct a range of expenses based on the following:
- the square footage of your home office
- utilities
- home repairs
- mortgage interest
- property taxes and insurance
- and more
Business-related Travel Expenses
Many business travel expenses may also qualify as deductions, provided they are ordinary and necessary. (It should be noted, however, that business trips with a few vacation days tackled before or after the business portion of the trip will likely also qualify, depending on individual circumstances.)
Deductible expenses related to business travel may include the following:
- Airfare, train tickets, or other transportation costs
- Hotel or Airbnb costs
- Meals
- Tolls, parking expenses, and other related fees
- Taxis and rideshare services
Office Supplies and Equipment
Regardless of whether you work from home or an office, the office supplies that you use every day may also be deducted from your expenses. Examples of office supplies that you should keep track of include the following:
- Desktops, laptops, and cell phones used for business
- Paper, folders, writing utensils, and other standard materials
- Software that is essential for your business
- Printer ink and other routine expenses
Employee Salaries and Benefits
The cost of your employee wages and benefits can be one of the largest tax deductions as a small business owner. In addition to an employee salary alone, you may also be able to deduct paid time off, commissions, bonuses, and contributions to retirement accounts.
You can also deduct payments made to contract workers or freelancers, provided that you fill out and file a 1099-NEC form for any non-employee who earned $600 or more for the year.
Marketing Expenses
Marketing is another expense that can add up for small business owners.
Marketing expenses can be varied, and these deductions include:
- Print advertisements
- Online and social media advertisements
- Marketing consulting services
- Promotions events and outreach programs
- Business cards, posters, and banners
Essentially, any tool that you use to spread the word about your business can likely be deducted when you file your taxes.
Education and Training
Suppose you or your employees require education or training in order to grow your business and your expertise. In that case, these expenses can likely be deducted if it allows you and your team to grow your knowledge in your industry.
These education and training expenses may include the following:
- Online or in-person courses and classes related to your work
- Educational materials, including books, magazines, and online training subscriptions
- Networking events, seminars, and webinars
- Certification fees or expenses
- Travel expenses to attend workshops, classes, or other training events.
Small Business Tax Planning with Waters Hardy
Remember that this is just the tip of the iceberg when it comes to small business deductions, and you need an expert tax planning partner to maximize your deductions across the board.
At Waters Hardy, we’ve worked with small business owners across multiple industries since 1981, and we use our strict and thorough quality control process to ensure no stone is unturned when it comes to your potential deductions.
Let’s work together to ensure that your small business doesn’t leave money behind. With Waters Hardy, you can put money back into your business to thrive, grow, and expand in the years to come.
Reach out to us today, well before the April 2024 deadline.