Posted on: 6 June 2015Share
As a small business owner, you may worry about taxes all year, especially if this is your first year filing as a business. There's probably less reason for concern than you think, though. While it's true that small business owners often owe money when the tax year is over, there are numerous tax deductions that can significantly reduce your bill--or eliminate it altogether. Here are some of the best deductions business owners can use to generate the greatest amount of savings.
1. Equipment Costs
Most businesses, both established and new, have equipment costs throughout the year. Generally, you can capitalize these expenditures, which often reduces your tax burden. But there are actually special tax laws that allow you to deduct the full amount of certain equipment costs the first year that you buy them. There are a few limits and restrictions on which items are included in these laws, and they may change from year to year. However, most equipment is included, so you should check with your accountant or the IRS to see if your purchases qualify.
2. Advertising Costs
If you started your business this year, you probably spent a lot on advertising costs to get the word out about your company. Luckily, those costs are tax deductible. This includes items like brochures, websites, business cards, and sponsorships.
3. Auto Expenditures
Do you drive a lot for business? If so, you'll be happy to know that mileage and auto expenses are deductible on your tax return. There are a few rules to follow, though. For one, you can only count the expenses associated with business use--personal use isn't counted as a deduction. Also, you must keep accurate mileage records to claim the deductions using the Actual Expense Method. Otherwise, you'll need to use the Standard Mileage Rate method, which is usually a lower deduction--but not always.
4. Legal and Professional Fees
Any money you spent joining professional associations, obtaining licenses and permits, or seeking legal counsel may be used as deductions on your tax return. Don't forget to include professional magazines, books you purchase that are for business use, and even money you spend on tax services.
As a small business, the best way to reduce your tax bill is to claim all the deductions that you're legally allowed. If you kept accurate records throughout the year, it should be easy for a tax preparation accountant to help you file your taxes accurately. With any luck, you may even be due a refund for money you overpaid throughout the year.