Taxes. That word alone is often enough to strike fear into the heart of small business owners the world over. But, taxes don’t have to be scary. People often fear what they don’t understand; thankfully, we’re here to give you some quick tips on how you can take advantage of small business tax savings strategies this year.
The Home Office
If you work from home, you probably have a home office. And if you have a home office, you can get a tax deduction. However, make sure you define a home office the same way that the IRS does. It has to be a space in your house dedicated to nothing else but your business. Claiming this tax break will allow you to get a deduction for insurance, rent, mortgage, electricity, etc.
You’ll probably need some furniture to go with your office. Thankfully, furniture is a deductible expense that you can choose to take 100 percent of during the year of purchase, or deduct a part of the cost each year over a period of seven years. If you decide to take the 100 percent deduction, then you should use the Section 179 deduction to claim it. If you opt instead to spread the deduction out, then you’ll have to consult the IRS chart to determine the furniture’s depreciation value for each year.
If your business requires you to drive, then you can claim a mileage deduction. It's a fairly simple process. Take the miles, tolls, and parking costs, and then multiply it by 54 cents to get the deduction amount.
Hotels and Travel Expenses
If you're a small business owner who travels, go ahead and stay in a comfortable room, because the cost is entirely deductible. Your travel expenses are also 100 percent deductible, whether you go by automobile, railway, or airplane. But, meals while traveling are only 50 percent deductible, so you might want to take it easy on the steakhouses.
If you have a landline, keep track of how many calls you made that were business related each month. At the end of the year, count them up and you can deduct 100 percent. However, most people use cell phones nowadays. Luckily, you can also claim cell phone calls as a tax deduction. So, say that 40 percent of your cell phone calls are business related; you can deduct 40 percent of your phone bill.
A Recap on Tax Savings Tips
Taxes don’t have to be scary and understanding them will help you save money. So, don’t forget to claim those deductions this tax season!
Are you a small business interested in learning more about income tax services in Washington DC or another location? We offer accounting services for the local Washington DC area, as well as virtual services that are available for people anywhere in the United States. Contact us to learn more: (202) 789-8898