Being a small business owner myself, I’m always looking for new ways to save money. These small business tax deductions can save thousands each year. These are the tax deductions that my accountant recommends every small business owner should use.
Cost of Goods Sold
This is fairly self-explanatory. Cost of goods sold applies to businesses that either manufacture a product or resell a product. The cost of goods sold can also include some of your other expenses but you may only use each expense one time. For instance, if you use an expense for cost of goods, you cannot later use it as a business expense. This deduction should be used for raw materials, direct labor, and even factory overhead.
Business Use of Your Home
When your small business is based out of your home, as mine is, you may possibly be able to use this deduction for utilities, the interest you pay on your mortgage, and even repairs. Many people don’t take advantage of this tax deduction simply because they aren’t aware of it.
Business Use of Your Car
I use my vehicle to transport goods for shipping. You can claim a tax deduction if you use your vehicle for business. However, if you use your vehicle for business and personal transportation you do have to separate the two. This deduction is based on actual mileage. It sounds like a pain to keep up with but I’m now in the habit of keeping all receipts and just jotting down my mileage in a notebook I keep in my purse. This deduction is worth the extra effort if you use your vehicle even once per week for business purposes.
Amazingly, some people don’t take advantage of this tax deduction and it’s very important for any small business. Capital expenses include start up costs for your business, improvements made to your business, and even covers business assets. Even the cost of changing from one heating system to another is considered a capital expense. If you use your home as your office you can use this small business tax deduction even though it’s your home.
Things to Consider
A qualified accountant can make doing your taxes a breeze. If you feel brave enough to do your taxes yourself you can find information on small business tax deductions at the IRS.gov. You’ll find information on how much you can deduct; which varies with different small businesses. Non profit organizations do have different rules than a for profit business. Generally most small business tax deductions will fall under cost of goods sold, capital expenses, business expenses, or deductible expenses. As a small business owner you should take advantage of every available tax deduction.