With tax season comes the annual gathering of documents and receipts. Now that you own your own business, things may be a little more complicated than when you were simply doing your personal taxes. To make matters worse, tax laws change frequently, and what worked last year may not work for your business this year.
However, change can be good. It's possible that you can shave a considerable amount off your tax bill if you claim as many deductions as possible. Of course, this means knowing about those deductions and using them to your advantage.
Home sweet work
Like many small businesses, you probably don't work from a towering building with your company name emblazoned over the doorway. More than likely, you operate from your own home or a small rented office. Either way, you may be missing some important tax deductions. It is possible your office qualifies for deductions in certain cases, including:
- Renting an office: You can probably deduct most of those expenses.
- Co-working space: If you work in a community of entrepreneurs, your regular usage fee may be deductible.
- Using a home office: You may be able to deduct a percentage of your mortgage, estate taxes and some utilities.
Deducting a home office includes a list of caveats and calculations. The IRS typically bases these deductions on the square footage of your office and the fact that the space is not used for any personal reason.
Sharing personal property with your business
Your business may require a vehicle or even a fleet. For example, you may do home repair or own a towing company. Maybe you are like many small business owners who use their personal vehicles for business purposes. In most cases, you can claim the cost of purchasing and operating a vehicle exclusively for your business. When using your personal car, only certain work-related trips will qualify. Tax consultants recommend keeping scrupulous records of your trips and mileage.
Keeping careful records of your personal phone use may also allow you to claim a percentage of your cellphone fees as a business expense. Similarly, you may also be able to deduct something as simple as a magazine subscription, for example, if you purchase a professional journal to improve your business skills or subscribe to a popular magazine for your customers in the waiting room.
Keeping your business strong
These are only a few of the possible deductions you may not have considered. Business losses, interest on debt and payment processing fees may also bring you tax relief you weren't expecting. You may want to discuss these with your attorney to see how they apply to your situation to avoid any IRS penalties for claiming ineligible deductions.
A tax attorney will know and understand all the current allowable business deductions. With solid advice, you will be able to enter tax season with confidence that you have taken advantage of every possible allowance.