When dealing with the IRS, honesty is always the best policy, but that doesn’t mean that small business owners shouldn’t utilize all the tax breaks they deserve. If you run a small business, taking legitimate deductions lowers your taxable income; thus putting more money into your pocket at the end of the year.
So, make sure to take advantage of the following five deductions:
Every single business supply you buy can be deducted at the end of the year. Make sure to track all your office supply purchases, and always keep your receipts. Lots of business owners don’t track small supplies because they think it’s not worth it; when they do this, they lose out on a lot of money at the end of the year.
If your office uses more than pens and paper, you have another opportunity to take advantage of tax breaks. If you buy furniture and fixtures for your business, or home office, you can deduct 100 percent of its cost, or you can deduct a portion over time. It is considered a necessary business expense. As the Houston Chronicle outlines, “office furniture would be any furniture including chairs, desks, office printers and related electronics, shelving and picture frames which are used strictly in your office. The office furniture must be necessary for the operation of your business.”
Business Software and Subscriptions
A recent update to Sec. 179 of the IRS tax code gives small business owners the opportunity to deduct off-the-shelf computer software costs. In the past, only computers were deductible; today, you can fully expense the price of software that you buy over the course of a year. Don’t forget to deduct your industry-related magazine subscriptions as well. These deductions might not be huge, but every bit helps.
Did you know that small businesses can receive a tax break when they provide insurance for their employees. When you create a captive policy, you offer employees insurance in an area where it is unreasonably priced or unavailable. If you create one of these programs, there are lots of attractive associated tax breaks. If your company’s gross income is under 1.2 million dollars, you can write off all of your expenses that relate to your insurance. Sec. 831 of the tax code also indicates that your company can avoid taxes on its primary income; you only get taxed on investment income. This is further explained in section 813b of the tax code, as well. Ultimately, there are numerous benefits of captive insurance that may be right for your small business.
Employer-Provided Cell Phones
The government is finally starting to realize that cell phones are an important business tool. In the past, cell phones were taxed as property; that meant that you couldn’t write off their full value. Today, you can write off your cell phone without tracking all your calls; there’s no longer any reason to separate personal and business calls. Basically, you can write off all of your cell phone expenses.
Tax law is confusing, but if you do your research, you can save a lot of money over the course of a year. As a small business owner, you need to take advantage of every tax break you get; this will help your business flourish and succeed in the long-run.
Tricia Borren is a mom and a blogger from Beverly Hills. If you’re looking to save money on insurance costs, she recommends looking at 813b of the tax code.
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