As someone in charge of the company finances (not to mention everything else in your business), you’re constantly on the looking for opportunities to save.
Throughout tax season, business owners have a number of money-saving opportunities through deductions of business expenses.
The IRS website states that for business expenses to be deductible, the expense “must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.”
And while some business owners go to extremes to deduct some pretty off-the-wall expenses (here are some crazy stories of business deductions that have worked… and some that haven’t), there are some pretty straightforward deductions the vast majority of businesses can take.
Here are nine business services fees you can deduct.
1. Legal & Accounting Services
your business deductions, and legals fees for acquiring business assets must be added under property instead.
Fees charged by your accountant or money spent on tax and bookkeeping software services such as TurboTax and Quickbooks can also be deducted.
2. Marketing & Advertising Services
Any ordinary or reasonable advertising cost is tax deductible. If you hire an agency to help you create business cards or flyers, or to create and place TV, podcast and social media ads, that service is deductible.
3. Design Services
For most businesses, web design is an ordinary or necessary expense, but often it should be treated as a capital expenditure. However, according to James Sutton, CPA, “if the useful life of that graphic is going to be less than a year anyway, then it is tax deductible that year under the IRS’s 12-month safe harbor rules.”
If you pay for web design services and the website being designed is the business, then you may be able to deduct the expense as a startup expense. Sutton notes that, “if the web page is the creation of a business, then it might be treated as a ‘startup cost’ that is technically a capital asset, but you can make an affirmative election on the business’s first return to deduct what I believe is currently $5,000 of startup costs.”
4. Cleaning & Janitorial Services
Cleaning and janitorial services are ordinary and necessary for most businesses to keep up an office space or storefront, thus they can be deducted.
5. Repair & Maintenance Services
You can elect to deduct repairs and maintenance to your tangible business property, or you can elect to classify them as capital expenditures. If you elect to capitalize them, however, it applies to the total amount paid for maintenance services that you treated as capital expenditures on your books for that tax year.
6. Food Delivery Services
This expense falls under entertainment expenses if you are “entertaining” clients or employees, however only 50% of the expense can be deducted. If an employee pays for food delivery and you reimburse that amount, the reimbursed amount can be deducted as well.
7. Lyft & Uber
The cost of commuting to and from your business office is not deductible, but if you use transportation services to get to an off-site meeting or from one workplace location to another, that expense can be deductible.
8. Outplacement Services
Businesses who provide support services to employees who are leaving the business, such as resume assistance and career counselling, can deduct the cost of those outplacement services.
9. Your Nav Account
Nav Premium and Premium Plus customers can record and deduct the monthly or yearly charge of their Nav account as a business expense. This is great news for business owners, because Nav Premium gives you a detailed look at your personal and business credit reports—see the numbers behind your business credit scores and exactly what accounts are reporting derogatory information. Premium Plus members get the upgraded level of business credit details details about 5 of their customers, PLUS their FICO SBSS score and report. Learn more about what Nav’s Premium accounts offer.
Tax season can often seem like one big sticker shock for business owners, but taking advantage of deducting the right business services can minimize the blow.
As always, check with your accountant or tax specialist about proper business deductions and how to file them. If you find out you owe more than you can afford, you can always work out a payment plan with the IRS or opt for a short-term business loan to cover the tax bill. Tax liens can take a major toll on your personal and business credit scores, making it difficult to obtain business loans when you need them, so be sure to work with your accountant or tax professional to figure out how to avoid a bill from Uncle Sam.