Previously, we brought to you the first part to our small business owner’s ultimate guide to tax deductions. Our goal with this guide is to help you, a small business owner, get the most money back during tax season. If you have yet to check out the first part to this guide, click here right now and catch up on what you have missed!
First off, you can take a deduction for a lot of things, just not everything. In this guide, we’re going over most applicable expenses listed in Schedule C (sole proprietors) and Form 1120 (corporations), as well as what fall underneath them.
Leases and Renting
If you’re renting anything for your business, you are able to write off the whole amount. The most common deductible expenses that fall under this category includes:
- Office / Event Space Rentals
- Coworking Memberships
- Furniture Rentals
- Special Equipment Leases (cameras and computers)
- Storage Locker Rentals
Legal & Professional Services
As a small business owner, there simply isn’t enough time to manage everything yourself. If you don’t already have an in-house legal or bookkeeper, you most definitely have a third-party helping you in those areas. You can write off the expense for any attorney, accountant, bookkeeper or tax professional you’ve paid in the last year. That’s a lot of money that can add up!
If you do have an accountant that manages both your personal and business accounts, you can only write off the latter as a business expense. Your accountant should be able to tell you the overall costs for both services.
Licenses
The majority of small business require licenses in order to keep the business up and running legally. You can write off any taxes or fees you pay for a license, including:
- Local Business Licenses
- Trademark/Copyright Fees
- Professional Licenses
- Business Formation and Renewal Fees
- Employer Payroll Taxes
Maintenance & Repairs
Having to repair and maintain your office space can be costly, fortunately you write off any of these costs on your tax return. This covers any repairs and maintenance needed for office equipment or the space itself. The most common items we see that fall under this category includes:
- Plumbing Repairs
- Electrical Problems
- Equipment Maintenance (i.e. replacing air filters in the office space)
- Equipment Repair (i.e. fixing a faulty computer)
Supplies
You can write off supplies you use for your business in full. Don’t get supplies confused with your inventory. Supplies are items you use on the daily and having to replace in order to have smooth business operations. You’re not selling your supplies, you’re using them. This includes:
- Art supplies for posters and other hand-crafted goods
- Stock photos, website templates, paid fonts and other digital supplies
- Disposable utensils (for restaurants or events)
- Printer ink and paper
Traveling & Meals
Here’s a big deduction that’s often confusing, but we’re here to help. Travel costs and purchased meals for business related purposes are tax deductible. These costs only count if the trip is primarily for business purposes, not necessarily a dream vacation ordeal.
You can write off pretty much everything during a business trip. This includes lodging (hotel or Airbnb), transportation (taxis, Uber, etc.), airfare and other transportation fees, service tips, and laundry/dry cleaning while traveling.
Meal costs can be a little trickier but is still easy to calculate and write off. You can only write off 50% of a meal (including foods and drinks) so long as the occasion is purely for business purposes. This includes luncheons and drinks with clients, mentors, employees, etc. whom you are discussing business with. It also includes any food you purchase for your employees. What doesn’t count towards this deduction are personal lunches or when you’re out at a restaurant getting work done by yourself.
Utilities
You can deduct utilities you pay just to run your business. This includes a lot of items such as:
- Electricity, Water and Gas
- Internet (including mobile hotspots)
- Phone Costs
For phone costs, if you’re using a device for both personal and professional use, deduct the percentage of the costs you’ve used for work such as data and call minutes.
Wages
You can actually deduct wages you pay your employees! This doesn’t include wages you pay yourself as a business owner, unfortunately, but this can be a nice little deduction.
Work Expenses
Any purchases you make to have a more productive workplace falls under this tax deduction. This includes a lot of common expenses that are tedious to keep track of, such as:
- Paper, notebooks and writing supplies
- Office decor
- Office furniture worth less than $2,500
- Computer accessories – computers, monitors, mice, headsets, etc.
- Shipping materials
- Cleaning supplies and services
Extraneous Costs
There are some expenses that don’t fall under any other category above but still have a crucial role in your business, and they are tax deductible. Here’s a few key ones.
Education Costs – You can deduct a lot of education expenses, just make sure you know the rules for them. This includes paying the tuition of an employee to further their secondary education, online courses, physical books or e-books, conferences and seminars.
Clothing – You can’t deduct clothes you wear to work every day, but if you provide your employees required clothing such as scrubs, fishnets or aprons, you will be able to deduct these costs.
Subscriptions – If you’re using a CMS or have a subscription to services such as Adobe Creative Cloud or Shutterstock used only for your business, you’re able to write off the costs of each in full.
Startup Costs – The first year of a business is the toughest year, lucky for you there’s a $5000 deduction for new business owners. This covers most startup expenses, including advertising, training, equipment costs, etc. For anything that’s worth over $5,000 you can depreciate over time.
What’s Next for You?
By no means is this list finite! This guide has only covered the more common deductions small business owners need to know about. If you still have the need to ask, “Can I deduct this?” let us help you! Our team here at Lucia CPA will be able to give you all the answers you need so you can get the most deductions and biggest tax return this year and every year after!
Feel free to contact us online today or call us at (800) 614-0139. We are not your ordinary bean counters!
