As a small business owner, you’ve got a lot on your plate.
From customer service to maintaining employees to sales growth to everything else you’re juggling to keep your business growing, it can be easy to lose track of a thing or two. That’s true for tracking potential deductions from your taxes. And while you may be doing a great job keeping your bookkeeping up to date, there may be some major deductions you’re missing from your business expenses.
With business operations changing so much over the last year, here are some potential deductions you don’t want to miss when it’s tax time.
1. Home office
If there was an official term for the year 2020, “home office” would be among the best choices.
So many of us transitioned to working from home when the coronavirus pandemic began in March of last year. We got creative, made use of the available space, and did some great work considering the circumstances.
Don’t let that investment and hard work go to waste. Be sure to consult with one of our expert CPAs to tell you just how much of your home workspace you can claim.
2. Business use of car
Just because you worked from home doesn’t mean you didn’t use your car for work.
If you use a vehicle strictly for business purposes, you can claim all the expenses associated with it. If you’re like many freelance or small business owners whose vehicles are making deliveries and picking up kids from soccer practice, here’s a simple breakdown of your options.
Standard mileage rate
With this method, you track the miles you accumulate using your car for business and multiply that amount by that year’s standard mileage rate. In 2021, the rate will be $0.56 per mile.
Actual expenses
Rather than tracking mileage, you can track the amount of money invested in maintaining your work vehicle. This will include gas, oil changes, repairs, tires, insurance, registration, and lease payments. To determine your expense, multiple your expenses by the percentage of time you used your vehicle for business purposes.
3. Business retirement plan
For business owners, paying yourself first is a great way to cut down on your tax bills. But contributing money to a retirement plan for you or your employees to save money without paying taxes on it is another great way as well. There are several of these plans available, so make a plan to meet with one of our experienced accountants to find the right plan for you and your staff.
4. Advertising
A business can’t grow if no one knows about you.
That’s why advertising is critical to growing your business. And while some of the best advertising opportunities can be pricy, you’ll be happy to know advertising expenses are fully deductible.
Some of these expenses are obvious (website costs, digital advertising, etc.) while others are not, so a conversation with one of our expert accountants can make a significant difference in reducing your tax bill.
5. Legal and professional fees
Some businesses just require investing in legal expertise. If legal and professional fees are necessary and directly related to running your business, they are tax-deductible. These fees can include attorneys, business coaches, financial planners offering guidance for your business, bookkeepers, and tax experts (like us at RiverRidge).
6. Telephone and internet
You simply can’t operate a business today without investing in high-quality internet and phone service. And while those expenses can add up quickly, you can deduct the expenses used for operating your business.
7. Business meals
So many deals are made during lunch meetings, so you don’t want to go cheap when impressing a potential client. You can generally deduct about 50 percent of these costs, but the expenses must be an ordinary part of running your business to be eligible for the deduction. A licensed CPA can give insight into what is and is not eligible for this deduction.
8. Insurance
If you decided to get insurance for your business, which you should strongly consider, the premiums are tax-deductible. These may include liability coverage, health insurance, workers compensation, business interruption insurance, and other items.
9. Bank fees
Bank fees can be frustrating. However, if you use separate accounts for your business, the fees for your bank account and/or credit cards for your business are tax-deductible. You can also deduct merchant and transaction fees for credit card transactions.
10. Cost of workers
Whether or not you have a staff of employees, you likely have used or will use freelance or independent contractors to complete various projects. It’s easy to forget about these workers in your day-to-day operations, but it’s important to track these expenses.
Remember, if you pay an independent contractor more than $600 during a calendar year, you must send them a FORM 1099-NEC by January 31st of the following year.
11. Education expenses
You may be an expert in your field, but there’s always more to learn.
If you invest in continuing education or your profession requires a certain number of hours of continued education per year, you can deduct the costs associated with this investment if it brings value to your business or can help increase your level of expertise.
There may be several expenses associated with continuing education that you may not realize. It’s important to discuss this with an experienced accountant to ensure all eligible deductions are accounted for.
CPAs On Your Side in Franklin & Knoxville Tennessee
Effectively managing your finances can make a difference if you want to grow successfully. With our team of experienced, expert CPAs, we know how to make your finances work for you.
To learn more about how innovative growth and accurate results with RiverRidge CPAs can be a game-changer for your business, call and schedule an appointment today.