Your Small Business Tax Deductions: Keep More Money in Your Pocket in 2023
Are you looking to save money this year? Who isn't? Between the rising cost of groceries and gasoline, something’s got to give. One of the simplest ways to reduce your income tax bill is to ensure that you take advantage of every small business tax deduction to which you’re entitled.
Getting the most out of your small business tax deductions starts with knowledge and ends with having the right tax preparer on your side. Preparing for this inevitable moment throughout the year is the key to getting the most out of your small business tax deductions and ensuring your tax season runs smoothly.
How to Get the Most Out of Your Small Business Tax Deductions
Knowing which tax deductions will apply to your business will help with planning. We’ll explore some of the well-known tax deductions and some of the unique deductions to assist in maximizing your tax return.
As stated above, small business tax deductions hinge on the following:
1. Claiming as many expenses as possible to reduce the tax paid on your income; and
2. Tracking throughout the year to ensure to account for all expenses
Paying attention to the income and expenses flowing in and out of your business on a month-by-month basis will assist in organizing your small business deductions. Let’s take a look at some of the deductions that you may be eligible to claim.
Common Small Business Tax Deductions
Office Supplies – Items used in your business's day-to-day running, such as stationery, pens, stamps, etc.
Business Supplies – Items used within your business to perform a service which could include tools used by an electrical service, food for a restaurant, etc.
Marketing/Advertising Fees – Materials and services used to market yourself and your business, including business cards, television and radio ads, web hosting, website domain name costs, etc.
Rent/Mortgage – Monthly rent and mortgage payments for the property or land used for your business.
Home office – Your home office can also be a deduction. The amount to be deducted is determined based on your home's square meters versus your office's square meters. For example, if your home is 4,000 square meters and your home office is 400 square meters, you can claim 10% of your home office expenses as a small business tax deduction.
Telephone & Internet – Electronic services such as your cell phone or internet services are eligible as a tax deduction.
Utilities – Expenses for utilities such as electricity, gas, heat, water, and maintenance, etc.
Meals – Expenses such as taking your client out for dinner or to an event are eligible to be used as a small business tax deduction.
Travel – Travel expenses such as airplane tickets, expenses associated with business seminars, and the cost of meals while travelling are also eligible as a small business deduction.
Professional Fees – Fees associated with tax preparation, bookkeeping, and lawyer’s fees are all eligible as a small business deduction.
Unique Small Business Tax Deductions
Bank Charges and Interest – Bank charges and interest fees on loans borrowed for the business can be claimed as expenses.
Bad Debts – Money you have been unable or do not intend to collect is also eligible as a small business deduction. Fees associated with collection efforts would also qualify as an expense.
Health Service Plans – Health service plans paid for employees (and their dependents) are also eligible as a small business expense.
Property Tax – Property tax for the building and land where your business is run can be claimed as a small business expense.
Hire the Right Help to Maximize Small Business Deductions
Maximizing your small business deductions starts with hiring the proper tax professional. There are a few things you can do to assist with making your decision, including:
1. Reviewing the Tax Preparer’s Credentials
2. Looking up reviews from past clients
3. Receiving a referral from family or friends
4. Ensure fees align with your budget
5. Asking about the tax preparer’s availability and whether they can meet your deadline
If something doesn't feel right when choosing your tax professional, it might be best to keep looking. It's important to remember that this individual will be handling your sensitive information, so you must choose someone you can trust for the long term.
Start Maximizing your Small Business Deductions Today
To get the most from your small business deductions, it's helpful to know which expenses are deductible. It's also beneficial to hire a tax preparer and/or a bookkeeper that can keep you on track throughout the year and maximize your business deductions when the tax season rolls around.
If you're searching for a new tax preparer to trust this season, we can help! Contact us today, and we'll assist you in maximizing your small business deductions for your upcoming tax return.