Small business owners can often times find savings where they least expect. For company heads preparing to do their taxes over the next couple of months, there are savings waiting if you know where to look. To get the best deductions possible when running a small business, make sure you review the following:
Home expenses Many small business owners make their residence their primary office space. In these instances there are a number of deductions that you can declare including a portion of your monthly rent, electric bill, phone bill, office equipment and maintenance and upkeep of your office. Keep in mind that the ‘room’ you use as your office must be utilized exclusively for business purposes. Deductions for a home office are typically based on the percentage of the residence devoted to business use.
Auto expenses One of the most common deductions is the usage of your automobile for transportation to work-related functions. According to the IRS, current rates for such travel are 55.5 cents per mile for business miles driven, 23 cents per mile driven for medical or relocation purposes, and 14 cents per mile in relation to service of charitable organizations. Make sure you log the mileage necessary for business travel so that you can present it to your accountant at tax time.
Start-up and expansion You can include some deductions for starting and expanding a small business. All start-ups and expansions for small business are not the same, so be sure to speak with a tax expert.
Schooling and training If you are taking classes or attempting to get certified for the business field you are currently in, you are permitted to deduct such expenses. Save receipts for educational material purchases such as books.
Business meetings Record data when it comes to meeting clients. Half of your meals and/or entertainment expenses from meeting with business clients will be permitted deductions.
New regulations in effect for tax year 2013 The IRS recently announced that it is offering a new, simpler option for tabulating the home office tax deduction, permitting small business owners and employees who work out of their residence and who maintain a qualifying home office to deduct up to $1,500 per year. The new option permits qualified taxpayers to deduct annually $5 per square foot of residence office space on up to 300 square feet, for as much as $1,500 in deductions. To use the new option, taxpayers will reportedly work with a much simpler version of the current 43-line form. The new option for the home office deduction will be not be in effect until the Tax Year 2013 return, which many taxpayers file early in 2014. In the meantime, dig out those receipts, review those mileage logs, and round up any other expenses you accrued over the last 12 months from working out of your home.
About the author: With 23 years of experience as a writer, Dave Thomas covers a wide array of financial topics, including small business payroll.