Small Business Tax Deductions

Tax Write Offs

The tax write-offs are the deductions that you can claim and reduce taxable income while doing so. If you’re operating a business, most of your business expenses are deductible. The self-employed individuals should claim every bit of deduction to pay less tax and get a refund.

For self-employed taxpayers, the deductions are broader because of the business expenses. Pretty much any expense that you’ve made for operating a business is deductible. The most common deduction taken by self-employed individuals is the self-employment tax, rents, travel, and health insurance premiums – just to name a few.

This isn’t the complete list of deductions though. There are plenty of other tax write-offs you can claim to reduce your taxable income. Here are the 10 tax write-offs you can take advantage of for the next tax season.

Advertising

The cost of advertising through any form of ad including online ads such as Google Ads, Facebook ads, etc. are deductible. As long as the advertisement is for advertising your business, you can deduct the amount paid.

Business Insurance

The insurance premiums for any type of insurance to protect your business is deductible. Whether you have fire insurance, vehicle insurance, credit insurance, or business liability insurance, you can deduct the premiums paid. This will help you get coverage without thinking that it’s a waste of money if you were never able to claim.

Education

The education expenses such as training employees and teaching them certain skills are deductible. However, not everything will count as education. It must be directly related to the field of work so that you can claim it. For example, if you’re running a software company, you won’t be able to deduct how to repair a car course, etc.

Health Insurance Premiums

Self-employed individuals who pay for their own health insurance premiums and aren’t able to participate in a plan offered through the spouse’s employer, all the cost of insurance premiums including dental and long-term care insurance premiums can be written off.

Interest

The interest paid on a business loan is tax-deductible. However, only a portion of the loan can be deducted. That said, if you solely used the business loan for your business, all the interest paid is deductible. If not though, the business portion must be calculated and the interest you can deduct.

Utilities and Internet

The utility bills you pay such as phone, fax, and internet expenses are deductible. Same as other deductions you can write-off, the expenses must be for business. You can even deduct the cost of running a website for your business.

One side note about phone lines is that you cannot deduct your monthly bill right away. You can only deduct the additional cost of long-distance business calls such as international calls or the cost of a second phone line dedicated solely for business. So you must have two phone lines to deduct the costs.

Meals

The meals you pay whether for yourself or for a client when traveling for business is deductible. However, you cannot deduct more than 50 percent of the cost or 50 percent of the standard meal allowance set by the General Services Administration. See the per diem rates 2021 to see the meals & incidentals costs which you can deduct half of them.

Rent

The rent paid is a direct business expense, thus, it’s deductible from taxable income. You can deduct the cost of paying rent for office space, equipment, a cancelation fee of business fee, etc. One thing you shouldn’t miss out on this deduction is that you cannot deduct the rent you pay on any property you own. The same applies even if you own a portion of the property.

Self-Employment Tax

The self-employed tax which is paid to fund Social Security and Medicare is deductible from taxable income. Since you will pay at least 15.3 percent of income toward self-employment tax, you can get a hefty deduction to reduce taxable income.

This deduction is also can be claimed for the Social Security and Medicare taxes when matching the employee FICA taxes. FICA tax rate 2021 for employees is 7.65 percent which the employer matches.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button