Planning ahead and understanding the various deductions available are key components that help lower your business tax liability. For business owners, it is important to understand their tax liabilities and maintain compliance with regulations. This article will provide long-term tips to help business owners lower their business tax liability with deductions. Knowing which deductions are available, how they are applied, and the impact they have on taxes can be a daunting task. However, understanding these deductions and taking advantage of them can save businesses a significant amount of money on taxes each year and even result in multiple years with a lower overall tax bill.
Home Office Repairs, Alterations
Your deductions for your home office don’t stop at the new laptop or computer desk. Repainting, re-flooring, and adding new or different lighting fixtures – all of these things are deductible if you are using the repaired or renovated part of your home for your work activities.
When it comes to business expenses, many people overlook the things that seem “outside” the norm when it comes to tackling what is deductible and what isn’t. But remember – if you redid the flooring in your entire house and you only use 10% of its square footage for work, you can only deduct that amount, not the full renovation cost.
It may even be beneficial to space out renovations in your business spaces over a few years if you’re able. This can help with tax planning and will lower your business tax liability for a longer amount of time.
Research and Development
R&D is a core component of your business. Whether you are testing new inks for a t-shirt printing business or creating new inventory software for your corporation, you have to do quality research and development to keep your business thriving and growing.
These R&D tax credits (which were recently doubled via the Inflation Reduction Act) can reduce your tax liability dollar for dollar, up to $500,000.
If you are a solo professional – i.e., a parent running their own business – any childcare costs that are incurred due to business responsibilities are deductible! If you have to drop your child off at daycare while you run to a client meeting, hop on a zoom call, or work through your latest marketing campaign, you can write off those childcare expenses.
Prices (and inflation) are rising. And with that, your ability to pay your business expenses gets harder and harder. But there’s good news.
Nearly all of your financing costs incurred by your business, including loan interest and fees, lines of credit, credit cards, and more are deductible if you meet the requirements.
Some examples would be mortgage interest on the office buildings and/or properties you are using for your business operations, lease and contract financing charges, and extended payment term fees.
Use Your Home for Business Meeting Rentals
If you are a leader or owner of a business, but your business isn’t primarily run from your home, you can rent it out for business purposes and deduct those expenses.
Homeowners can rent out a room in their home for a business meeting, deduct the cost from their business taxes, and they will also not have to claim that rental fee on their personal tax return.
Per the Augusta rule, homeowners can rent out a space in their home for 14 days and not report that income to the IRS.
As if increased inflation and rising prices weren’t enough, the real estate market has also noticed some substantial shifts in the last few years. And that means many businesses have relocated.
If your business has moved its operations from one location to another, you can deduct the cost of moving any and all business equipment, supplies, and inventory. Did you move from Main Street to a few smaller satellite offices? Increase or reduce the size of your office building rental? Did you open a second branch and relocate some employees or contractors? All of the moving expenses associated with your business are deductible.
Small Business Tax Deductions Start with Information (and Information Returns)
Small business tax deductions are often hard to decipher, but with the help of your trusted tax expert, you can take advantage of some of the less obvious benefits our tax code affords entrepreneurs and self-starters.
eFile360 is a tool for those who run their own business or hire those who work independently as contractors and freelancers, and need help organizing and e-filing their information returns. We offer cost-effective bulk filing, options for print and electronic, and have a helpful team standing by to assist you however you may need us.
Trying to lower your business tax liability by keeping your information returns organized and your tax filing process quick and painless? Sign up for a free eFile360 account today!