How to Maximize Small Business Tax Deductions

Knowing the tax laws helps you maximize your tax deductions.

Although running a small business is sometimes challenging, there are many benefits as well. One of the biggest benefits is the large number of tax deductions that small businesses can claim. Whether a business is a small one-person freelance business or a 40-person printing business, the IRS definitely provides many advantages to keeping it small. The hardest part of maximizing small business tax deductions is keeping track of all of the necessary receipts and knowing what you can claim to begin with.

Instructions

1. Deduct the following automobile expenses: mileage, gasoline costs and repair costs. You can only deduct these expenses if your vehicle is used for business-related travel. You must also keep detailed records of the mileage driven and the business-related task that was performed in case of an audit.

2. List expenses incurred to start your business. Some of these deductions include business license fees, business cards and other marketing and capital expenses. These are capped at a $5,000 reimbursement level so anything over that amount is not deductible.

3. Deduct the cost of any training classes or certifications that you paid in order to start your business. These are included under the educational expenses category of deductions and can even include completing your college degree.

4. Include fees incurred as a direct result of operating your business. These include legal fees for lawyers you keep on retainer, tax professionals and fees for professional associations to which you are a member. You can even deduct the cost of books you purchase if they directly relate to your business.

5. Deduct any unpaid bills and other bad debt that you failed to collect from clients.You can only claim this deduction if you actually sell a product to a client. You cannot claim this deduction if you only provide a service to a client.

6. Include the costs of food and entertainment if they are directly related to your business. You can even include the cost of a hotel room and airfare if you fly a client to your location. You can deduct 50 percent of the cost of these items.

7. Deduct the cost of all new office equipment and software that is required for your business. This includes computers, printers, even office supplies. You may or may not be able to deduct the full cost, but you will be able to deduct at least a percentage of the cost, depending on your individual circumstances.

8. Include any taxes that you incur as part of doing business. These may include sales tax on office supplies, fuel taxes on gasoline, the business share of employment taxes and taxes on property and vehicles used for business purposes.

9. Deduct expenses related to marketing and advertising your business. Qualifying items include business cards, ads in the yellow pages, ads purchased in the newspaper as well as sponsorship of local events.

Tips & Warnings

• If you are in doubt about a deduction, consult a tax professional.

References

• NOLO: Top Tax Deductions for Your Small Business