What Can You Deduct On Your Small Business Taxes?

Deductible Business Accounting firms expenses help entrepreneurs with numerous costs associated with running a company. Business owners are aware that the majority of expenditures can be written off, despite the presence of limits and timing issues. So what are the most common tax deductions in case of small businesses? Here, we discuss some of the most common deductions which were claimed on Schedule C of Form 1040 by sole proprietors-

Car and Truck Expenses

Majority of small businesses utilize a vehicle, like a car, van or light truck. Cost of operating the vehicle for businesses is deductible only in case there are necessary records for proving business usage. In case of deducting of costs, the necessity to maintain records of costs(e.g. oil changes, gasoline) is eliminated if you depend on IRS mileage rate of 54.5 cents per mile in 2018, rather than deducting your actual outlays. You can utilize the standard mileage rate instead of your own or lease vehicle.

Salaries and Wages

Payments made to employees such as wages, bonuses, salaries, commissions, and taxable fringe benefits, are deductible businesses expenses for businesses. For payments benefits programs, such as retirement plan contributions. Payments made to partners, sole proprietors, and LLC members are not wages since the owners are not employees.

Contract Labor

Numerous small businesses utilize freelancers or independent contractors for meeting their labor-related needs. The cost of this type of contract labor is deductible according to companies which offer VAT registration. Numerous businesses utilize freelancers or independent contractors which satisfy their needs. The cost of this contract labor is deductible. Be sure to issue Form 1099-MISC to any type of contractor receiving $600 or more from you in the year. (if payment is made to a contractor using a PayPal or credit card, it is up to the processor to issue them Form 1099-K, but you might want to send your1099-MISC for personal protection.

Suppliers

Cost of items used in business e.g. cleaning supplies for a cleaning service as well as postage for fully deductible business expenses. Also, in case you utilize a de minimis harbor enabling you to deduct the cost of tangible property (e.g. vacuum cleaners, tablets) instead of depreciating, such items are treated as supplies and non-incident materials. These are deductible business expenses when purchased or furnished to customers, whichever is later. 

Depreciation

The deduction is an allowance for the cost of buying property for your business. This comprises Section 179 deduction of equipment purchases up to a dollar limit. There are also certain limits which are applicable. The depreciation category also includes a bonus depreciation allowance. This limit is 100% of property acquired and placed in service following September 27, 2017.

Taxes

You can deduct regulatory fees, licenses and taxes on personal property and real estate. Your employer taxes such as employer share of FUTA, FICTA, and state unemployment taxes, are fully deductible business expenses. But, self-employed business owners, the deduction for half of your self-employment tax isn’t a business deduction. This is an adjustment to the total income of your income tax return. And in the owners of pass-through entities cannot treat state and local income taxes on business income as a business write-off. Such personal taxes are deductible only for Schedule A of Form 1040.

Repairs

The cost of ordinary repairs and maintenance are deductible. On the other hand, costs which add to the value of a property are normally capitalized and recovered via depreciation. There are different safe harbor rules which allow an immediate deduction in any event.

Commission and fees

These are fully deductible and may require you to report them on Form 1099-misc. But, commissions paid in relation to buying reality are deductible. They are added based on property and are normally covered via depreciation.