Most small business owners are unaware of many of the tax deductions that are readily available to them. This may be because they are not keeping the detailed accounting records that are necessary to itemize these deductions, or they may simply be in the dark. That is why it is crucial that you read over this list of possible deductions if you are a small business owner, whether your company identifies as a sole proprietorship, partnership, LLC, or corporation. Any of the following may be deducted:
Utility Costs
The utilities that you use as a business are completely deductible. These can include electricity, water, internet, and phone service, and trash removal. These deductions can even extend to home offices.
Inventory
Inventory-based companies are those that purchase items for resale or manufacture their own wares. Entrepreneurs that employ such a business model can deduct the cost of their inventory on their end-of-year taxes. That said, these goods must be valued at both the beginning and end of the tax year to determine the cost of the inventory that was sold.
Various Types of Insurance
Health insurance, business owner’s policies, and business continuation insurance are all completely deductible on a business owner’s taxes. In addition, property, malpractice, auto, and life insurance, as well as worker’s compensation costs, are all also one hundred percent deductible.
Startup Costs
The IRS recognizes business startup and organization costs as capital expenses. This is because the money invested in a business is transformed into an asset since it technically hasn’t really left the company.
The interesting thing is that capital expenses can typically count as deductions for a number of years. They are referred to as amortization, which allows businesses to gauge their profitability annually.
In conclusion, there are many more deductions out there that small businesses can take advantage of. They just need to conduct their research to learn more about them. If you are a small business owner and you are interested in finding out more about such deductions, be sure to make an appointment for a consultation with a tax professional near you.