As a small business owner, you probably want to have as many tax deductions as legally possible. But it is important to pay attention to the IRS’s guidelines and regulations about what is tax-deductible and what is not. It is easy to accidentally overlook possible tax deductions when totaling up expenses at the end of the year.
1. Auto Expenses
There are a couple different methods of claiming auto expenses for your small business. First, you can either keep track of all the business-related expenses involving the automobiles used by your company. This method is generally used for newer cars because you can include the vehicle’s depreciation, which is usually large in the first few years, into the deduction. The second method is deducting a certain amount of money for each mile driven and recorded, in addition to payments for tolls and parking.
2. Professional Fees
Any expenses made towards hiring lawyers, bookkeepers, consultants, p.r. firms, and tax experts can be deducted during the year of the expense. This can add up to quite a bit at the end of a year.
3. Bad Debt
The expenses incurred by an individual who uses your company’s product but does not pay may be deductible. It depends on what kind of company. If you sell goods, you can indeed deduct the cost of the products you sold but were not paid for. If, on the other hand, your company provides services, you will not be able to make a tax deduction for the time that was devoted but not paid for.
4. Entertainment Expenses
Paying for entertainment for current or potential clients is allows a 50% deduction, as long as the entertainment was directly related to and associated with the business.
5. Travel Expenses
Business travel allows many tax deductions, including expenses such as air fare, car rentals, hotels, food, phone calls, tips, and more. You can only deduct your own individual expenses, even if you bring family along with you on the business trip.