Common deductions that business owners overlook
Updated: Oct 9
In the complex world of taxes, business owners often miss out on several key deductions that can significantly reduce their taxable income. One common oversight is the deduction for home office expenses, applicable when a specific area of the home is dedicated exclusively to business activities. Similarly, many entrepreneurs fail to fully deduct expenses related to business use of their vehicle, which can be claimed based on mileage or actual expenses incurred.
Another frequently overlooked deduction is for depreciation, which allows business owners to recover the cost of significant purchases like equipment or furniture over time. Additionally, expenses for professional development, such as training courses or industry-related conferences, are also deductible but often missed. Business owners should also remember to deduct fees associated with legal and professional services, which include accounting and consulting fees. By staying informed and meticulous in tracking these expenses, business owners can maximize their deductions, ultimately enhancing their financial health and operational efficiency.
A Checklist of Deductions to Ask About
Home office. The IRS simplified method lets you deduct $5 per square foot, up to 300 square feet, which is $1,500.
Mileage. Keep a log with the date, the miles, and the reason for each trip.
Business meals. These are generally deductible at 50 percent when they have a business purpose.
Software and subscriptions you use for the business.
Phone and internet, for the part used for business.
Retirement plan contributions, such as a SEP IRA or Solo 401k.
Fees for your accountant, lawyer, and bank.
Keep Good Records
A deduction you cannot prove can be taken away in an audit. Keep receipts, a mileage log, and a note of the business reason for each cost. Do this all year, not just in April.
This post is for general information and is not tax advice. Talk with your tax professional about your own situation.
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