Tax Deductions for Starting a Small Business

Why Take Tax Deductions for Starting a Small Business?

The more tax deductions your business can legitimately increase, the lower your taxable profit will be.

In addition to putting more money in your pocket at the end of the year, the tax code provisions governing deductions can also bring personal benefits: a good car to drive at a lower cost, or a business trip and vacation combination.

It all depends on paying close attention to the IRS rules about what is, and is not, deductible.

When totaling your business expenses at the end of the year, don’t forget these important business tax deductions.

So in this article we will discuss 9 of the common and frequently used tax deductions for starting a small business.

1. Car costs

If you use your car for business, or if your business has its own vehicle, you can deduct some of the costs of keeping it on the road.

There are two methods to claim costs:

Actual cost method. It tracks all of your actual business expenses and deducts and deducts a depreciation amount each year.

Standard mileage rate method. You deduct a certain amount (the standard mileage rate) for each mile traveled, plus all business-related tolls and parking fees.

Check the IRS website for the current standard mileage rate.

2. Business expenses

When running a business, costs like advertising, utilities, office supplies, and repairs can be deducted as the costs of running a business, but not before opening the doors of your business.

The costs of establishing a business are capital, and you can deduct $ 5,000 the first year you are in business; any balance must be deducted in equal amounts over the next 15 years (180 months).

3. Books and legal and professional rates

Business books, including ones that help you dispense with legal and tax professionals, are fully deductible as a cost of doing business.

Fees paid by you to attorneys, tax professionals, or advisors can generally be deducted in the year incurred.

However, if the job is clearly related to future years, they must be deducted over the lifetime of the benefit you receive from the attorney or other professional.

4. Insurance

You can deduct the premiums you pay for any insurance you buy for your business as a business operating expense. This includes:

  • employee health insurance
  • fire, theft and flood insurance for commercial properties
  • credit insurance that covers losses from business debts
  • liability insurance
  • professional malpractice insurance – for example, medical or legal malpractice insurance
    workers’ compensation insurance that state law requires you to provide to your employees
  • business interruption insurance
  • life insurance covered by officers and directors of a corporation unless you are a direct beneficiary of the policy, and
  • Unemployment insurance contributions (such as insurance costs or business taxes, depending on how they are characterized by the laws of your state).

5. Travel

When you travel to a business, you can deduct many expenses, including the cost of a plane ticket, the costs of operating your car, taxis, lodging, meals, transportation of commercial materials, cleaning of clothes, telephone calls, faxes and tips.

6. Interest

If you use the credit to finance commercial purchases, interest and transportation charges are tax deductible.

Keep in mind you may have to pay interest if you take a very large business loan and use the income for your business (speak to your accountant about this).

However, if your business profit is more than $ 25 million, you can only deduct 30% of your interest costs depending on your location*.

7. Charitable contributions

If your business is a partnership, a limited liability company, or an S corporation (a corporation that chose to tax you as a partnership), your business may make a charitable contribution and grant you the deduction, to claim your individual tax return.

If you have a regular (C) corporation, the corporation can deduct charitable contributions.

8. Educational expenses

You can deduct educational expenses if they are related to your current business, trade or occupation.

The cost should be to maintain or improve the skills necessary in your current business. (The cost of qualifying education for a new business or trade is not deductible.)

9. Publicity and promotion

The normal cost of advertising your products or services (websites, business cards, yellow page ads, etc.) is deductible as an operating cost.

Promotional costs that create business goodwill, for example, sponsoring a football team.


Before you go, I hope the above article summing up the common tax deductions for starting a small business is beneficial and informational for you.




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