Small business owners have the ability to take advantage of many tax breaks to cut down on their tax bills and hold on to more of the money their companies generate. Some of these tax deductions are often overlooked and are never even claimed, which simply puts more money in Uncle Sam’s pockets. If you own a small business, consider claiming the following commonly missed tax deductions when you file your taxes next:
#1 – The Vehicle Deduction
Deducting the costs related to using a vehicle is a fully legitimate option for taxpayers who use it for business-related reasons. To qualify, you must use your vehicle to travel from a home office or a place of employment to a different location for business reasons. There are two ways to claim this write-off. It’s based on either total miles driven or actual expenses incurred. The standard mileage rate for 2013 is 56.5 cents per mile, meaning you can claim this amount for every mile you drive for business purposes. Using the actual expenses option, you can include gas, tolls, vehicle repairs, and insurance when calculating your specific deduction amount. It’s important to see which option will save you the most money.
#2 – Deducting Home Office Expenses
The IRS’ home office deduction can serve as a valuable tax-saving opportunity for those who use part of their home to run a business. You can claim a portion of the expenses you incur that are directly associated with conducting business in a residence. Such expenses include mortgage interest, insurance, rent, electricity, repairs, and Internet access. Remember that these costs must be specifically tied to conducting business. They must also be part of a designated room or small area in your home used for business purposes. For tax year 2013, the IRS announced a simpler alternative to handle the home office deduction calculation – $5 per square foot for up to 300 square feet of space. The maximum deduction amount is $1,500.
#3 –Medical Expenses & Health Insurance Deductions
Medical costs, including health insurance premiums, are generally tax deductible for small business owners. If you maintain a self-insured medical reimbursement plan for healthcare reasons, you may be able to claim up to 100% of any out-of-pocket costs you incur as a write-off. Plus, medical costs for the spouses and dependents of business owners also qualify as a tax deduction for many business owners.
#4 – Meals & Entertainment Deductions
Did you know that you can claim certain meals and entertainment expenses as a tax deduction if you run a business? This is a pretty popular write-off among newly crowned small business owners who haven’t been able to deduct these expenses before. According to IRS rules, meals and entertainment must be considered ordinary, necessary, and directly tied to your business. An example is if several employees of a business discuss their work over a tasty, four-course meal at a local steakhouse. A portion of the bill can be deducted. To write off these costs, save your receipts and maintain a record of all participants in a meal or form of entertainment and what exactly was discussed during this gathering.
#5 – Deducting Non-cash Contributions to Qualified Charities
Last, but certainly not least, non-cash contributions made to qualified charitable organizations can be a tax deduction as well. The value of items like clothing, furniture, and household goods is 100% deductible in most cases. The donation of a used vehicle to a qualified charity can be a write-off as well. Save all relevant receipts you get for these donations. You may also receive handwritten acknowledgements from charities. Either way, having this paperwork is necessary for proof of your contribution when claiming this deduction.
To ensure compliance with requirements imposed by the IRS, we inform you that any US federal tax advice contained in this article is not intended or written to be used, and it cannot be used for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Please consult a tax professional or accountant for professional advice.
Recommended Books to Avoid Missed Tax Deductions:
- 475 Tax Deductions for Businesses and Self-Employed Individuals: An A-to-Z Guide to Hundreds of Tax Write-Offs
- Deduct It! Lower Your Small Business Taxes
- J.K. Lasser’s 1001 Deductions and Tax Breaks 2013: Your Complete Guide to Everything Deductible
- Tax Strategies for the One-Person Business: 2013 – 2014 Edition
- HOME BUSINESS TAX DEDUCTIONS: Keep What You Earn
- What Qualifies for a Home Office Tax Deduction?
- Tax Time: Check If You Qualify for Home Office Tax Deductions
- Types of Insurance for Your Home Business
- Starting a Medical Billing Business
- How to Save on Tax as a Home Business Owner in Australia