With April 15th right around the corner it is once again time for that dreaded time, tax season. If you are a small business owner preparing to file your taxes there are a few key deductions you may want to look into before the filing deadline.
Whether your company owns a vehicle or your personal vehicle doubles as your work vehicle everything related to your automobile that is being used for your business is tax deductible. While claiming auto expense deductions can be tricky, it is definitely worth the time investment.
There are two ways that you can go about deducting auto expenses for business purposes:
- Actual Expenses: You keep track of and detail all expenses related to your vehicle for business use, maintenance costs, gas receipts, car washes etc.
- Standard Mileage Rate: You deduct an amount based on miles driven and parking and toll fees paid. The mileage rate for 2014 is 56 cents per mile and if you put considerable miles on your car for business related purposes is usually the way to go.
To claim the standard mileage rate, you must start claiming it the first year you start using the car or auto for your business and you cannot have filed a claim for accelerated depreciation deductions in prior years. It is also important to keep track of the actual miles you use your vehicle for conducting business and to not deduct the miles you drove that were not business related. If you only have one vehicle for both personal and business use, no IRS auditor is going to believe that 100 percent of your mileage was business related.
Expenses of Going Into Business
Start up related costs are different and also tax deductible up to $5,000 only during the first year of your businesses creation. Expenses of going into business on the other hand are deductions that you can take for business related expenses after you have opened your doors and are operational. Advertising expenses, utilities, office supplies, and repairs are all normal costs associated with going into business and are all tax deductible.
Training Materials And Professional/Legal Fees
Any business related books, conferences, or workshops are a tax deductible expenditure for your business as long as you retain receipts. Similarly any legal or consulting fees charged to your business during the year are tax deductible the following year.
Products Sold But Never Paid For
If you run a purely service-based business, unfortunately you cannot deduct time spent on projects or with clients that was billed but never paid for. If you sell a product or products, however, you can deduct bad debts for products that were shipped but in which payment was never received.
If you take a potential client out on a business dinner to woo them during your sales pitch you are allowed to deduct up to 50 percent of the expense involved. In order to deduct business entertainment expenses, you must prove that either of the following are true:
- Business was conducted or discussed during the event
- The event is associated with the business and took place either immediately prior to or following a business related function.
If you take a business related trip, virtually all expenses incurred are tax deductible. Airfare, meal costs, taxi fare, etc. are all tax deductible. Even trips that are a mix of business and pleasure are tax deductible as long as over 50% of your time on the trip was spent conducting business.
Any interest payments on a credit card, business loan, personal loan paid out to your business, etc. are all tax deductions on your return. If you claim this deduction make sure to keep itemized track of all purchases made so that you can prove that the purchases made were in fact for your business.
These are simply a small sampling of deductions available for small business owners. Consulting a CPA or certified tax specialist is the best option available to you before filing your small business taxes to ensure you claim the maximum deductions, and its tax deductible too.