While filing business taxes may not top your list of favorite activities, it’s an essential part of running a business. This process may even help you discover ways to save money by running a more tax-efficient business through a variety of tax deductions and credits.
Here are a few small business tax breaks you may have missed, plus some tips on what to watch out for when managing your business taxes all year round.
Tax Breaks for Small Business Owners
The IRS considers some necessary business expenses tax-deductible — if the business exists to make a profit. Small business owners may overlook these expenses because they do seem so ordinary. Don’t miss the following deductions:
- Startup costs – associated with creating or acquiring a business, like visiting potential business locations or incorporation
- A home office deduction – including a portion of your rent or mortgage payments
- Some inventory – depending on your total sales and industry
- Qualified contributions – to a retirement plan like a SEP, traditional IRA or 401(k)
Tax Incentives to Know About
Three tax incentives for businesses have recently been extended, so don’t miss out on these money saving business tax breaks, if you qualify.
- Section 179 allows businesses to deduct the full price of eligible new or used equipment or software bought or leased during 2015 (up to $500,000).
- Bonus Depreciation lets business owners deduct half of the cost of qualified new equipment purchased in 2015 — this has been extended to 2017.
- The Research and Development (R & D) Tax Credit has been made permanent in 2016, and benefits businesses with under $50 million in gross receipts. This tax credit may be used by businesses of all sizes researching and developing eligible new products and/or services. These may include developing new software, or even the legal costs incurred to develop a new patent.
Talk to a Business Tax Pro
Hire a business tax professional who knows what considerations could impact your small business. A tax accountant is familiar with the deductions and credits your business is entitled to. They’re experts in filing business taxes, and may help you avoid any costly fines or penalties that can arise from business tax return errors. Even better, accounting fees are tax deductible.
Remember Important Tax Deductions Year Round
Many business expenses are deductible, but they’ll only save you money if you remember to include them when filing your taxes. Learn what you can about common tax deductions for businesses. Read news stories on business tax changes so you don’t miss out on new or revised deductions. Bookmark government sites and visit them monthly to learn more about what your business may be entitled to.
Most importantly, don’t think about doing your taxes as a once-a-year event. Tax planning should be ongoing throughout the year. This makes filing your small business taxes less complicated at tax time. It also gives you time to find the most tax-efficient strategies for your business.
To explore benefit solutions for your small business, contact your broker, or click here.
Additional Resources
Startup Cost Tax Deductions
Retirement Plans for Small Business
Section 179
Small Business and Self-Employed Tax Center