Starting a profitable small business is an important goal for many folks. Whether you are in the planning stages, or already up-and-running, one key to profitability is legally minimizing your taxes. Although the tax code provides many legitimate tax advantages for small businesses, some of this can be obscure or unclear, at least at first.
A recent article by Steve Nicastro, appearing on the NerdWallet online site, highlights several commonly overlooked small-business tax deductions. See if these can boost the profitability of your enterprise.
The IRS allows some big breaks for certain costs of starting up your business. Included among these are pre-launch advertising, employee training, business consulting fees and legal fees. Qualified start-up costs up to $5000 are deductible as are up to an additional $5000 in certain organizational outlays. These deductions phase out if your total start-up costs exceed $50,000.
A little-used but highly useful deduction is in the area of education. If you pay to have your employees educated or trained in any aspect of your business, the IRS permits you to deduct these costs. Examples of education expenses are the costs to maintain professional licenses, to gain new skills, and for obtaining degrees that are of direct benefit to the business. Indeed, in some cases, self-employed business owners may be able to take these deductions.
Home Office Deduction
If you operate your business from home, you may be able to deduct home office expenses. Make sure that the room or area of your home that you deduct is used specifically and only for business. You can deduct actual cost or use an “IRS simplified method” covered in IRS Publication 587.
Remember, it is important to keep good records when taking these deductions. Make sure to keep receipts, invoices and any other documentation related to these deductions. As long as you have the proof, these are legitimate deductions that can significantly improve the profitability of your small business.
Tax Tips for the Self-Employed
Small Businesses Are Expected To Get More Audit By IRS in 2021
Everything You Need To Know About Form 1099-NEC
An Overview of the Net Operating Loss Tax Provisions in the CARES Act
How To Decrease Your Small Business Debt? A Step-By-Step Guide