17 Big Tax Deductions Write Offs for Businesses Bench Accounting

Business travel deductions represent one of the small businesses’ most significant tax-saving opportunities, yet they’re often under-utilized due to poor tracking. Every business mile and travel and entertainment expense can contribute to your tax savings, from local client meetings to international conferences. These deductions are subtracted from your gross income to determine your adjusted gross income (AGI). If you qualify, you can take them regardless of whether you itemize or take the standard deduction.

Section 179 expense deduction

When someone owes your business money, and you can’t collect it, this is a bad debt. Bad debt expenses can happen if you sell a good or service to a customer with the understanding that they’ll pay you later (in other words, on credit), and it becomes clear they aren’t paying. You may deduct expenses related to caring for minors or dependent adults from your taxes.

Take Advantage of Software Subscriptions

If travel is part of your business requirements, you’ll want to save as many receipts as possible as there are many deductions available for business travel. As long as your trip is necessary for business, you can deduct everything from plane tickets and hotel fees to laundry and dry cleaning, tips, and parking fees. It doesn’t matter if you rent an office space or you run your small business from your apartment, rent is considered tax deductible. Keep in mind that you cannot deduct the entire amount of your apartment if you work from home but rather the percentage that you use for business.

☐ Pay quarterly estimated taxes

You may consider an expense business-related, but that doesn’t matter if the IRS classifies it as a personal expense. Understanding how ordinary and necessary expenses are defined can help. In addition to employee salaries, you are also allowed to deduct an employee’s paid time off and commission or bonuses, as well as employment taxes related to payroll. The caveat with this tax deduction is that the meal needs to be work-related.

First-year depreciation of business assets

• Claiming these deductions helps to reduce a business owner’s taxable income while still getting necessary healthcare protection.
• It’s vital to note that you must itemize your deductions to take advantage of this deduction.
• By locating the $6,000 in contractor expenses, Bench was able to reduce Joe’s tax liability by over $1,500 dollars.
• Basic costs such as transportation, office supplies, and tools, services such as accountant fees, and marketing can be deducted without needing receipts.
• Liz has 11 years of experience in public accounting where she has assisted companies through all phases of business development from inception to dissolution.

Your total IRA contributions cannot exceed either your yearly maximum contribution or the entire income you received that year, Whichever is smaller. The total net loss that your small business had in 2021 cannot be deducted if it lost more money than it made. Your business loss deduction is only worth $524,000 if you’re married and filing jointly. Your deduction for business losses if you are single is capped at $262,000 per year.

For the taxable year, you must classify the remaining loss as a net operating loss. If you have employees that took FMLA leave during the year, you may be eligible for a 12.5% to 25% tax credit. 22 small business tax deductions checklist for your return in 2023 There are several eligibility requirements, which you can see on the IRS site under Form 8994. While these categories offer some flexibility, it’s still advisable for businesses to maintain thorough documentation whenever possible.

• It is important to ensure you understand the tax implications of your business structure prior to starting your business.
• Once you’ve determined your deduction rate and accounted for all applicable deductions, it’s time to create a filing plan.
• Tax credits are a great way for businesses to reduce their tax liability and motivate investing in certain areas.
• These costs are normally included on itemized deductions on Schedule A.
• This is a valuable deduction, as it can help offset the cost of protecting your business from various risks.
• Consider hiring a tax professional to guide you through the complexities of small business taxes.

Every industry has its unique set of deductible expenses that often go unclaimed simply because business owners don’t realize they qualify. From specialized software subscriptions to industry-specific equipment, these hidden deductions can add up to significant savings. Understanding the deductions particular to your field can give you a competitive advantage and boost your bottom line. Let’s explore some industry-specific opportunities you might be missing regarding tax deductions for a small business. Itemized deductions let you cut your taxable income by taking any of the hundreds of available tax deductions you qualify for.