When you run a small business, every penny counts. One way to save money and keep more of your hard-earned profits is by taking advantage of tax deductions.
As a small business owner, you should know how to maximize your small business tax deductions.
Separate your personal and business expenses
To secure your business tax credits and deductions, keep your business and personal expenses separate. This means having separate bank accounts and credit cards for your business transactions. Mixing personal and business expenses can make it difficult to track deductible expenses accurately and subjects you to potential tax penalties..
Take advantage of Section 179
Section 179 of the IRS tax code allows small businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. This can provide significant tax savings for small businesses investing in new equipment or technology.
Deduct home office expenses
If you operate your business from home, you may be eligible to deduct a portion of your home expenses, such as rent, utilities, and insurance, as a home office deduction. Although the rules applicable to this deduction are complex, one important requirement is that you must use a specific area of your home regularly and exclusively for business purposes.
Contribute to retirement accounts
Contributing to retirement accounts, such as a SEP IRA or 401(k), not only helps you and your employees save for the future but can also lower your taxable income. Small business owners can deduct contributions made to these retirement accounts, reducing their tax liability.
Take advantage of healthcare tax credits
Small businesses that provide health insurance to their employees may be eligible for healthcare tax credits. These credits can help offset the cost of providing health insurance and lower your overall tax bill.
Keep thorough records of all your business expenses, including receipts, invoices and other documentation. By maintaining organized records, you will understand your deductible expenses.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
