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Tax Deductions for Small Businesses

June 18, 2014

When you are running a small business, finances can be tight. You probably don’t want to give up any more of your profits to taxes than you absolutely must. Fortunately, there are many tax deductions available to small businesses that can help to minimize your tax burden. Read on to discover some of the most common tax deductions for small businesses.

  1. Home Office Deduction: Many people are reluctant to take a home office deduction because they fear that it increases the possibility of being audited. However, that isn’t necessarily the case. You just need to be careful that you define your home office according to the terms of the IRS. Your home office must be devoted solely to your business and not used for any other purpose. For example, a guest bedroom with a computer in the corner is not a home office. However, a home office doesn’t have to be an entire room; it can be a portion of a room. The key is to only claim your work area as a home office, so measure out your work space and divide it by the total square footage of your home.
  2. Office Supplies: You can deduct the cost of your office supplies even if you don’t claim a home office deduction. Save your receipts.
  3. Office Furniture: There are two ways that you can deduct office furniture. First, you can deduct the entire cost of the furniture in the year that it was purchased. This deduction will be applied in Section 179. The limit for tax year 2014 is $25,000. The second option is to deduct a portion of the cost of the office furniture over a period of seven years. If you do it this way, you must use the IRS chart to calculate the amount of the deduction each year.
  4. Office Equipment: Office equipment means things like computers, printers, and fax machines. Office equipment can be deducted 100% in one year or depreciated over a period of five years.
  5. Software: Computer software that has been purchased off-the-shelf can be deducted over a period of three years.
  6. Business Publications: Business related magazine subscriptions can be deducted 100% in the year that they were purchased.
  7. Mileage: It is important that you keep track of all business-related miles that you drive so that you can deduct them. Keep a log of date, mileage, purpose of the trip, tolls, and parking fees. There are two ways that you can deduct mileage. The first option is to calculate the mileage by multiplying the number of miles by the 2014 rate, which is 56 cents per mile. Then add your tolls and parking fees to determine your deduction. The other option is to measure business use of the vehicle versus personal use. Then you can deduct that portion of your auto expenses, including fuel, repairs, and insurance. Include lease payments. If you have a loan for the purchase of the vehicle, you can deduct interest and depreciation.
  8. Travel: Much of your business travel is deductible. You can deduct the entire cost of transportation and hotel stay, even things like tips for the housekeeper. While you are traveling, your meals are deductible at a rate of 50%.

These are some of the most common tax deductions that are available to small businesses. If you own a small business and could use some help figuring out your taxes, contact Acceler8. We are your small business advisors. We offer tax, accounting, and business advice, so get in touch with Acceler8 to learn more today.

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