For most people, the term “tax season” doesn’t evoke the same heartwarming feelings that phrases like “holiday season” or even “football season” do.
But alas, taxes are a necessary obligation we all face, and rather than dwell on it, I try to focus on the positive side of the situation. For me, that’s tax deductions! Working with my accountant to find all of the deductions I’m eligible for has turned into a game over the years. The more we find, the better my return – and the bigger the return, the better the prize!
Through owning many businesses over the years, I’ve learned that there are several deductions for which small business owners can be eligible. Unfortunately, many of these go unclaimed year after year, perhaps because tax payers are unclear if they are eligible for them or simply because they are unaware that they exist. Here are a few deductions you may want to look into if you’re a small business owner.
1. Startup costs will work in your favor once your business takes off. It’s important to record business expenses from the very beginning of your venture, because as soon as the business starts making sales, startup costs can be deducted. The trick to having the IRS consider them is having comprehensive records of these expenses, such as business-related equipment or educational courses. There are plenty of monthly services you can deduct as a business owner, like identity theft insurance or accounting services.
2. If you work out of your home, you may be able to deduct some of your home-related expenses that are also used toward your business. You are likely qualify for a home office deduction if you have a true designated space in your dwelling that is used exclusively for business purposes. If it’s your dream to work from home but you don’t have a home office, you might want to consider reinvesting funds from your next tax refund to set up a home office space. Paying this expense now could save you money in the long run, and could make you eligible for a home-based business deduction in the future. (Here’s a list of 23 deductions work-from-home entrepreneurs may qualify for.)
3. Keep a record of all of your car trips and automobile expenses. There are two ways to claim vehicle expenses, the actual expense method and the standard mileage rate method. You may also qualify for deductions based on the age of your vehicle, as well as any maintenance fees it requires to keep running. If you use your vehicle for business purposes at all, it’s wise to record every trip you take by logging the date, miles traveled and business purpose; parking or toll fees; maintenance costs; and insurance expenses.
4. As a small business owner, your primary focus may be on finding deductions for your business – but don’t forget about the ways you can save on your personal income taxes, too! Homeowners are entitled to a variety of tax benefits. If you’re on the white picket fence about whether you’re in the position to buy a home, read up on how you can create a home-buying budget and check out what your closing costs will be and how you can lower them. All this will help you better understand your financial position. Getting a mortgage while self-employed can be a bit trickier (here are some details on the hoops you may have to jump through), so keeping good books for your business is key to making that personal financial dream a reality (and ultimately scoring that sweet mortgage interest deduction).
While tax time will probably never be an occasion when you feel like breaking out your party decorations and confetti, it also doesn’t have to be a time of great stress. By taking advantage of the many deductions that may be available to you, tax season may end up feeling like a game you’re equipped to win.
Maple C. has made a career out of encouraging others to follow their dreams in all aspects of life. Her experience in the business world encouraged her to start her own blog, an inspiration hub for readers everywhere.