Top Tax Write-Offs for Small Business Owners

With each tax deduction you take, you reduce your overall tax burden. And as a small-business owner, you can use all the relief you can get.

Make sure you don’t leave money on the table this tax season by taking advantage of these top tax write-offs:

Home Office

If you use a portion of your home regularly and exclusively for work purposes and your home is the principal place that you conduct your business, you can deduct the expense.

To calculate your deduction, you have two options: You can go the simpler route and multiply a prescribed rate by the allowable square footage of the office to come up with the deduction. Or you can follow the more complex regular method, which requires you to determine the actual expenses of your home office, including mortgage interest, insurance, utilities, repairs, and depreciation based on the percentage of your home devoted to business use.

Note: The more complex option may take up more of your time, but if you’ve kept accurate records, you will likely receive a higher deduction going that route.

Meals and Entertainment

If you provide yourself, employees, or clients with meals or entertainment regularly for business purposes, you can deduct the expenses — as long as the reason for the expense furthered your business in some way (resulted in a sale, new client lead, or referral, for example). Meals include the amount you spend on food, beverages, taxes, and tips.

Save all your receipts and note on the receipt or in your calendar/planner the business-related purpose of the meeting. If you are audited, you will have to prove that the expenses were solely for the good of the business.

Note: You cannot deduct expenses for lavish or extravagant meals, so keep your expenditures reasonable.

Mileage

If you rack up the miles on your car for business purposes, you can claim the deduction in one of two ways: Total your mileage and multiply it by the 2015 Standard Mileage Rate of 56 cents. Or you can compare business use of your car against your personal use and deduct a portion of your expenses, including gas, repairs, depreciation, registration fees, and insurance.

Note: Your mileage meter starts at your first business-related destination (for example, your store or a client’s location) and you can’t include your commute to and from home.

Travel

Ordinary and necessary expenses you accrue when you or employees travel for business are deductible. These expenses include:

• Transportation by airplane, train, bus, or car between your home and a business destination (special rules apply to luxury water travel and cruise ships).
• Fares for taxis, buses, and limousines that take you to the airport and from your hotel to your business-related event.
• The cost of shipping baggage and materials used for business purposes.
• Expenses associated with operating and maintaining your car when you are traveling for business. (You can deduct actual expenses or the standard mileage rate; pick whichever one provides you with the highest deduction.)
• Tolls and parking.
• Car rental fees for the business-related portion of your trip.
• Lodging and meals if you are required to stay overnight or long enough that you need to stop and rest.
• Dry cleaning and laundry services you use during a business trip.
• Any business calls or fax expenses you accrue while traveling.
• Employee expenses — if the person has a business purpose for traveling with you and the expenses are permissible by IRS standards.
• Business associate expenses (for example, a current or prospective customer, client, supplier, employee, agent, partner, or professional adviser) — if the person has a business purpose for traveling with you and the expenses are permissible by IRS standards.

Maintain very thorough records of all of your expenses so that you can accurately calculate your deductions and explain any expenses should you be audited.

Employee Expenses

You can typically deduct the amount you pay employees for working for you. In addition, you can deduct the amount of money you put into employees’ (and your) retirement plans.

Business Expenses

If you rent property — and have no equity or title in it — you can deduct rent as a business expense. If you pay interest on money you borrowed for business activities, you can also deduct that cost.

In addition, you typically can deduct the ordinary and necessary cost of insurance as a business expense if it is for your trade, business or profession. Finally, if you purchase off-the-shelf computer software “that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified,” you can deduct the expense.

Education

You can deduct learning and professional development activities and resources for you and your employees, if those activities and resources are related directly to your business. Courses, workshops, seminars, trade shows, and even books, DVDs, magazines, and other training materials are deductible.

The potential for deductions doesn’t end with this list. Be sure that you can take advantage of every tax write-off available to you by doing your research — and preparing your documentation — sooner rather than later.

If you have any questions about your business accounting and taxes, please feel free to contact our office.