If you are a small business owner, you may want to know about small business tax write offs and start reviewing receipts and invoices. Many business owners do so in January with the aim to get tax deductions. Who would not want to channel back the money into the business rather than submitting it to the government? A little goes a long way with small businesses, and the following are tax deductions you may take advantage of for your business.
When it comes to paying your taxes, there is two options on how to do this. First, you may choose to automatically deduct actual expenses which includes maintenance, gasoline, tolls, and parking. Another more straightforward way is to use rates published by the IRS. According to the IRS, the 2018 Standard Mileage Rate is worth 54.5-cents each mile.
It does not matter whether you are making deliveries in your catering van or running errands in your SUV. Track your mileage and keep records to see which one of these methods provides you with higher deduction. Using the standard mileage rate is only ideal for those driving a lot of miles every year. If your vehicle needs regular maintenance, tax deduction using actual expenses is the perfect option.
You may also get small business tax write offs using square footage of your home that you use as an office. For majority of self-employed individuals, dedicating space at home devoted for your home-business is a standard practice. With a specific room to turn into a dedicated workplace, you may calculate the size of your deduction.
Divide your home’s total square footage by square footage you use as office. The result is the total percentage of indirect and direct expenses that you may deduct from your tax. The aforementioned expenses include utilities, repairs, rent, and insurance. Consult with a tax professional before you file your taxes with this type of deduction just to be safe.
Buying new capital equipment may also be your ticket to tax deduction. For example, you purchase a new oven for your home bakery, depreciation tax break may grant you about 40-percent deduction of total cost upon purchase. However, the capital asset you purchase must meet the following requirements:
- Your asset must be used to produce income
- The lifespan of capital asset your purchase has to be greater than 1-year
- The asset in question must either wear out or lose its value over time
Inventory, land and heating or air conditioning units are not considered as assets. Hence cannot be considered as small business tax write offs.