5 Commonly missed small business
tax deductions

For small businesses, taking advantage of every tax deduction can mean a big difference to the bottom line. You don’t want to miss out on any opportunities to save money. Here are five commonly missed tax deductions you should be aware of to minimize your tax bill: 

Start-up & organizational costs 
You can deduct up to $5,000 of business start-up and $5,000 of organizational costs in the first year of business if your total startup and organizational costs are each less than $50,000. Some expenses you may want to consider claiming in these categories are legal fees, advertising costs, accounting fees, permit fees, and LLC set up fees. Keep in mind that you can still deduct startup costs after the first year. 

Depreciation is a capital asset’s decline in value over time, and it can be used to substantially lower your tax bill. If your business owns a building, equipment, vehicle, or furniture, you may be able to expense it over time. For example, if you purchase a $10,000 car for your pizza delivery business, and it’s expected to last 5 years, you can write-off $2,000 each year against your taxable income. If you have multiple capital assets to depreciate, the savings can add up quickly! 

Home office costs 
If you operate your business exclusively out of your home, you may qualify for home office write-offs. The home office deduction allows you to deduct expenses like internet, utility bills, and even landscaping (if the appearance of your house is essential to your business’ success). The deduction is calculated based on the square footage of your home office. If your work space equals 20 percent of your home’s total square footage, you can claim 20 percent of eligible expenses. 

Business losses 
Sometimes, it can take a few years before a small business begins to see a profit. In those years that your expenses exceed your income, you may have a net operating loss. While this circumstance is not ideal, you can use it to save money. Once you determine your operating loss, you can use it to offset profits in a past year or carry it forward to a future year and legally minimize your taxes. 

Bad debt 
Depending on the nature of your business, you may choose to extend credit to your customers. Take into account that any loans or credit sales you make that become uncollectible can be used as tax deductions. All you have to do is establish that you’ve taken reasonable steps to collect the money. 

There are many more tax deductions available to small business owners. Your tax advisor should be your primary point of contact for tax issues, but it’s also a good idea for you to know about some of the more commonly missed small business tax deductions. Do some reach on your own and don’t be afraid to ask your advisor questions.

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