Tax deductions can serve as incentives to help taxpayers reduce their tax liability. But this is possible when they can are completely aware of all the possible opportunities for deductions. While large enterprises have their accounting department with tax specialists to leverage these deductions, small business owners tend to miss out on these potential savings due to a lack of specialist help.
Given the complexity of the modern tax code, it is understandable when they miss out on these deductions which is why remote accounting firms like Outsourced Bookkeeping offer Tax Consulting & Tax Filing Services. That said, if you are a business that wishes to get their tax filing done by yourself, it is important to get to know all the possible tax deduction opportunities.
Though there is a long time for tax filing, it helps to become aware of the tax deduction opportunities beforehand to plan accordingly. So in this blog, our tax consultants at Outsourced Bookkeeping will list our 6 common tax deductions that are usually missed by small businesses – to ensure you don’t miss them:
6 Common Tax Deductions Small Business Usually Miss:
1.The start-up costs: Not many know that start-ups can claim tax deductions even before they launch their business. Yes, up to $5,000 against the first year can be claimed as business expenses against the return, and even more, can be amortized for a period of the next 15 years.
However, it must remember the expenses that are made during the planning and development phase of the start-up businesses are only counted for the deductions. The expenses that are incurred after the launch of the business come under the operating expenses.
2.Tax deductions for leveraging personal appliances in business: Speaking of development costs and operating expenses in a start-up business, even personal appliances that were leveraged for business can be benefitted from tax deductions.
For example, if you have been using your laptop for business purposes you can claim the fair market value from the date of its conversion into a business device. The same goes for the cost of business calls you make using your mobile.
3.Home Office Expenses: If you are working your business from home, you will be granted the provision to deduct the home office expense against your income (business). At Outsourced Bookkeeping we calculate these home office expenses in two ways:
- We calculate by placing $5 per square foot of the home utilized for the business.
- Calculate all the expenses incurred for utilities, mortgage, repairs and general maintenance and then come up with a total deduction based on a percentage of the home used for business.
4. Mileage Expenses:In the same vein, the expenses incurred for using your vehicle for your business operations can also be deducted against the income. If you have dedicated the vehicle for a business-related operation, the entirety of the cost can be deducted. In case you are utilizing it for both personal and business purposes, the expenses incurred for the business must be tracked for claiming deductions.
5.Trade show & party expenses:Yes you read that right even trade show and part expenses can be leveraged for deductions. Trade shows particularly can be expensive for small and medium businesses and these deductions will sure help them reduce the burden. So we advise business owners to carefully track and document the expenses incurred for the show (travel tickets, lightning, electricity, and even carpet rental) to avail of these deductions.
Similarly, Party expenses (food and drink) for business lunches for employees can be claimed for tax deductions. In the majority of cases, the claim is capped at 50% and it can be amped up to 100% in case the party is in the benefit of their employees (and families).
6. Gifts for employees: Non-cash gifts given to the employees can also be used for tax deductions provided the conditions are satisfactorily met. One may deduct up to $25 per each for the non-cash gifts presented and the maximum deduction amount for each employee (For multiple awards) is capped at $1600.
The list doesn’t end there. There are plenty of tax deduction opportunities for small and medium businesses which can be leveraged to reduce the total taxable income. However, each opportunity comes with its conditions and exceptions which is why the assistance of an expert tax consultant or accountant is necessary and this is where Outsourced Bookkeeping can help.
As one of the leading remote accounting firms in the business, we specialize in a complete stack of booking and accounting services which also include accounts payable services , QuickBooks services. And this gives our tax experts an excellent chance to help a business uncover opportunities that can help them reduce their taxable income and bag potential savings.
Find more information on our tax consulting and filing services at our tax center here: https://outsourcedbookeeping.com/tax-center/