This tax season, you don't have to go it alone. This free tech tax guide from AT&T Business Circle covers common small-business tax deductions including potential technology deductions and small-business tax credits you should know about.
Here are 7 crucial tax deductions for small business
Running a business requires you to spend money to survive and thrive. The good news is that at tax time, some of this outlay may generate cost-saving deductions which can lower the amount of tax you owe. Tax laws change from year to year (see “What’s new for 2015” in the box below) and what you are entitled to deduct each year may vary.
Review the following types of small business expenses, and consult with your tax adviser to pinpoint savings for your company.
1. Technology and equipment
For the tools you purchase to run your business, the list of potential savings is long. These may include everything from computers, smartphones, hosted applications, and Internet service to refrigeration, lighting, and printers. Upgrades, support, training, and other costs associated with technology and equipment
are also typically deductible (see sidebar “Technology deductions for tax savings”). Tax rules and strategy may dictate whether you take all of these savings at one time or spread them out over multiple years, so work with your tax adviser to make these decisions carefully.
2. Supplies and inventory
Desks, chairs, file cabinets, cubicle walls, pens, and other office supplies are essential to business survival and are often eligible to help reduce your tax liability. Likewise, the inventory, supplies, and marketing you need to do the work of your company are also important expenses. Whether it is parts for items you build and sell; inventory you will use to stock your store; or shipping, marketing, and sales activities related to procuring or promoting your wares, these expenses may be at the top of the list.
3. Wages, salaries, and benefits
The costs of hiring and employing people are often some of the biggest expenses for any business and represent some of the most important categories of deductions. These expenses may include salaries or fees paid to employees or contractors, health insurance costs, retirement plan contributions, bonuses, training costs, tuition for work-related education, expenses for holiday parties, and costs of employee outings. You may also deduct fees for professionals such as lawyers, accountants, and consultants.
Travel for sales presentations, client meetings, supplier searches, trade shows, and meetings with vendors or partners can generate some of the types of travel expenses that may qualify for a tax deduction. Expenses that may be considered legitimate deductions include train and plane tickets; hotel bills; meals for you, customers, and employees; car rental fees; and wear and tear on your own car. The costs incurred by your employees while they’re traveling on behalf of the business may also be deductible if you reimburse them.
5. Startup costs
Expenses generated before you officially open your door may include: licenses, registration fees, and other fees associated with establishing your company; paid ads to announce your opening; employee wages during training; travel expenses and other costs of securing distributors and suppliers; consultants’ fees; and fees for other professional services. Since the expenses related to establishing a business are considered long-term investments in your company, these deductions may be spread out over a period of time, rather than taken off your return in one year.
6. Office space
Whether you rent or own the space your business inhabits, many of the costs associated with office space may be deductible. This applies even if you work from a home office (see “Understanding the home office deduction” on Business Circle). As with other expenses, you may deduct only the portion of the rent associated with an office used for business. Costs associated with your office include everything from rent or mortgage payments to furnishings, upgrades, or taxes on a building you own. Utility expenses to keep your business running can also be deductible.
7. Taxes, interest, and charitable contributions
If your business is required to pay a tax to any state or local jurisdiction — and most are — you may be able to deduct that cost as a business expense when calculating your federal taxes. You can also deduct the cost of interest you paid during the year on business loans and lines of credit. If your business provides contributions or support to a charitable organization, these donations may be deductible as well.
Download the full eguide to learn more about:
- Tax apps to simplify your efforts
- Technology deductions for tax savings
- How your EMV investments can lower your tax bill
- Ways to help your tax adviser help you
- How the IRS may help you save money
- 5 business decisions that can impact your taxes