Maximize Your Deductions: 5 Deductions You May Not Know About For Your Small Business

Small business owners are always on the lookout for ways to best manage their finances. Most business owners know about the most common business tax deductions, like rent, office supplies, or internet service, but there may be a few that might have slipped under the radar. 

Here’s a list of five business tax deductions that may save you money that you could reinvest in your business, and how to claim them: 

Bad debts from sales or loans – If your business happens to have provided a loan to clients or extended credit, it might come to pass that you are in a position where you cannot collect what is owed. This falls into the category of “bad debt”. To claim a bad debt, you need to show that you have made a reasonable effort to collect what is owed to you and have previously included the amount in your income. 

You must be able to prove the debt is uncollectible. Keep documentation of your attempts to collect – invoices, emails, phone-calls, etc. 

Education and Training – If you are improving your skills required for your business, you can deduct the cost of education and training. This also applies to education required by law to keep any licensure or professional status. 

This includes workshops, seminars, subscriptions to publications, online classes, etc. However, it only applies IF you are training for your current business and not learning something for a new trade or business. 

On a side note, make sure you keep track of all your expenditures – books, supplies, even travel. Also, keep records of what the education was for, and don’t forget to keep receipts. 

Startup and Professional Fees – Did you know that you can deduct the costs associated with starting up your business? You can deduct up to $5000 in startup costs and another $5000 in organizational costs. This includes market research, advertising, employee, training, legal fees, and/or incorporation fees. Any amount over the $5000 can be amortized over a period of 15 years. 

If you’re still in pre-revenue mode, track every penny separately. Comingling expenses is how deductions get missed, or worse, trigger an audit. 

Employee gifts – Everyone likes to receive gifts. Gifts must be non-cash and less than $100 in value. Some examples of employee gifts include: employee of the month parking, flowers, coffee mugs, sporting event tickets. 

Giving of cash gifts incurs taxes on the employee’s part and are qualified as income. 

Make sure you keep records of how much you spend and on whom so that you do not exceed the spending limit. 

Office Supplies – While most business owners know to write off their office supplies, do you think about including your postage and shipping costs? You can write off all of your paper, printers, computers, software, as long as you use them within a year of purchasing them. You can also deduct your postage and shipping costs. Keep all your receipts as documentation. 

Taxes are always a complicated subject. The list of available credits and deductions changes from year to year, and knowing what you qualify for is always a taxing matter as requirements change as quickly as the weather. It is in your best interest and the best interest of your business to keep detailed records and to consult with an accounting professional to stay on top of the IRS requirements. Be proactive with your business and make smart tax decisions. Consult a tax professional today.