10 Key Tax Deductions for Your Small Business

10 Key Tax Deductions for Your Small Business

by Kylie Ora Lobell, July 2016

Tax Day is coming up fast, which means that you have to get your finances in order as soon as possible. If you don't, you may forget to take some key small business tax deductions. These tax write-offs could end up saving you a lot of money if you utilize them correctly.

Although some items are clearly tax deductible, including office rent, utilities, and employee costs, others may not be so obvious when filing taxes. Aside from hiring an accountant to assist you, it pays to do research on your own as well.

Are you unsure about which small business expenses and tax write-offs you can make? Look no further. The following is a list of tax deductions that you may want to claim when doing your tax preparation this year.

1. Furniture

Did you buy furniture for your office this year? If so, it's tax deductible, and you can claim your chairs, desks, and couches as small business expenses. You're able to either write off the full amount, or use the seven-year depreciation method. While you have the option of deducting the entire cost in the year in which you put the items in service, depreciation may be more favorable if you expect your tax bracket to rise in the future.

2. Home Office

If your home office is your primary place of business, or it is where you meet with clients and customers, you can deduct certain home office expenses. To figure out how much your tax deduction will be, measure your home office and divide by the total square footage of your home. This percentage determines the amount of your mortgage or rent, utilities, and expenses related to your home office that you can claim.

3. Travel Costs

If you're traveling for work, chances are, you can take deductions for taxes on all of your costs. This includes airplane and train tickets, baggage fees, hotels, Wi-Fi access, business use of your car, etc. If you eat out while traveling, only 50 percent is deductible.

4. Interest

If you've taken out loans for your small business, or you have a credit card for business expenses, you can deduct the interest when it's time for tax filing. Although those interest fees can be a headache, at least you're able to claim them on your tax forms.

5. Consulting Fees

Did you spend money consulting with a lawyer, accountant, marketer, social media manager, or other professional who's assisting you in managing and growing your business? Those fees qualify as tax deductions.

6. Employee Health Care

If you are a small employer with fewer than 25 full-time equivalent employees that pays an average wage of less than $50K per year and pays at least half of your workers' health insurance premiums, your business is eligible for a tax credit under the Affordable Care Act. So long as the health care plans were purchased through the Small Business Health Options Program (SHOP), businesses can receive up to a 50 percent tax credit for the premiums.

7. Equipment and Software

If you purchased equipment or software this year, you can write it off on your small business taxes. Under Section 179, you're able to claim up to $500,000 in materials purchased. There is also a 50 percent bonus depreciation, which means that you can claim up to 50 percent of items purchased and put into service in 2015, 2016, and 2017. In 2018, the bonus goes to 40 percent, and in 2019, it will be 30 percent.

8. Charitable Contributions

Did you make charitable contributions to a qualifying 501(c)(3) organization this year—either in the form of a monetary gift or physical donation? These charitable contributions are tax deductible for individuals who itemize on Schedule A. Be sure to keep all documentation from the qualified nonprofit acknowledging the amount and date of your contribution.

9. Business Cell Phone Use

When you're a small business owner, you're working around the clock. This means that you most likely do business on your personal cell phone. Look at your phone bill and figure out how much of your time was spent on your cell phone making business calls this year. If your bill was $100 per month and 50 percent of your phone use was for business calls, then you can claim $50 x 12 months.

10. Lunch Meetings

If you have business meetings with employees or clients during a meal, those expenses can be deducted from your taxes. You're allowed to deduct 50 percent of your food and drink costs, so long as the meetings are for business purposes.

Tax Day will be here before you know it. By getting your tax records together now, and utilizing some of the tax tips above, you can maximize your business deductions.

Need tax advice? When you sign up for the business legal plan, you'll have access to a tax professional who can provide tax advice for your small business. As part of the plan, you'll also receive unlimited 30-minute attorney phone consultations on new legal matters and many other benefits.