Tax Deductions Small Business Owners Shouldn’t Forget
In these turbulent financial times, any small business owner or independent contractor can agree that missing out on a single tax deduction can be disappointing and insanely infuriating.
But when it comes to claiming tax deductions correctly, it’s not easy to do so without an intensive accounting education. But fear not, because I have some not-so-secret tax deductions small business owners shouldn’t forget.
Tax Deductions vs. Tax Credits
Both tax deductions and tax credits can reduce your tax bill each year, but they come into play during different phases of the tax filing process. Though this article will be discussing tax deductions small business owners shouldn’t forget, it is essential to know the difference between the two.
A tax deduction is money spent on expenses for your business throughout the year that when deducted will reduce your taxable income. One must gather and organize these expenses, then calculate and deduct them from your total income for the year. Tax deductions reduce your overall tax bill by reducing the amount of income that will be taxed.
Tax credits are implemented after your overall tax bill is calculated. Each dollar of tax credit you have will reduce your tax bill. If your tax bill is $0, refundable tax credits can even net you cash back in the form of a refund!
Education
You might be surprised to find that you can often deduct many workshops, classes, books, and other media that maintain or improve your skills within your industry. If it furthers your knowledge and hones your skills in your career, you can deduct it!
Say you’re in marketing, just beginning your life as a small business owner, and you’re looking to broaden your skill set. That Marketing Bootcamp class at your local community college – write it off! Want to brush up on your SEO skills with a short online course? Write it off, girl!
Don’t forget about subscriptions to marketing magazines or your favorite advertising guru’s blog. If they pertain to your industry, go on and deduct it.
Not only can you deduct your education costs, but you can deduct interest on school loans once you’ve started paying them. The parameters of doing so can be challenging to understand, so contact your tax pro to help you get the deductions you may qualify for.
Personal Appearance
These deductions can be complicated when it comes to tax deductions small business owners shouldn’t forget. Unfortunately, you can’t deduct your haircut or makeup, as you can use these outside of the workplace.
But what if you need to do a photo shoot for your new business’s website? You hire a hairstylist and a makeup artist to ensure you’re looking your best. Organize those expenses, from the photographer to the stylists, and you can deduct that!
When it comes to clothing, what you can and cannot claim as a tax deduction can get a little murky. If you’re an independent contractor working as a health coach with special certification in physical training, you can’t go writing off your Lululemon leggings all willy-nilly.
But these leggings are necessary for you to do your job, right? You can’t coach these people in jeans or a pants suit. If you consider those Lulu’s part of your everyday work uniform, put your business name or logo on them, and voila! They are now a tax deduction!
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Home Office
If you’re working from home, there are a plethora of tax deductions that any small business owner or independent contractor can claim. To qualify for a home office tax deduction, you must use your office exclusively for business and nothing else.
Suppose you conduct all your managerial and administrative activities from your home office but travel to job sites to conduct business. In that case, you can still claim a home office tax deduction for your business.
These deductions include home office repairs and maintenance, office supplies, real estate taxes, and depreciation on home office equipment, among others. Some are fully deductible, and others are only partially, so it is best to contact your accountant to clarify these guidelines.
Medical
You can’t be the best small business owner or independent contractor you can be if you’re not taking care of yourself. So, if you’re not feeling your best, go to the doctor! “But Sarah! Seeing a doctor is so expensive, even with my insurance!” Don’t worry; you may be able to deduct that!
When it comes to claiming these tax deductions small business owners shouldn’t forget, it is important to know you can only claim a medical tax deduction if your medical expenses exceed 7.5% of your adjusted gross income for the year.
Claiming medical expenses as a tax deduction can range anywhere from buying prescription contact lenses and glasses to paying insurance premiums for policies that cover long term medical care.
Closing
When it comes to catching tax deductions small business owners shouldn’t forget, it may seem like an impossible task for small business owners and independent contractors to know every little intricacy of what tax deductions they may qualify for.
Thankfully, I am here to help! Schedule a consult with me and we’ll get you on the road to receiving the most bang for your tax deduction bucks!
