One of the advantages to owning a small business is that you have additional tax deductions that are set up with business owners in mind. It’s hard to know which tax deductions are applicable to your individual situation, which is why you should work with an experienced tax accountant to maximize your write-offs.
1. Home office deduction
If you work out of your home, then it is possible to write off some of the expenses that you are paying for the cost of maintaining the home. A certain percentage of your rent or mortgage can be a write-off, as well as a portion of your utility bills, Internet costs and phone line.
2. Hire independent contractors
Instead of hiring a new employee every time you need to have something done, look at options to hire independent contractors. You don’t have to shell out for payroll taxes for independent contractors, and it can be cheaper to only pay for the hours and services that are needed instead of maintaining a full-time salary for an employee.
3. Cellphone bills
Almost everyone has a smartphone in their pocket, and many people use that phone for both personal and business reasons. You can choose to have a separate phone for your business, or simply write off a portion of your personal phone bill to cover the business usage.
4. Maximize travel and entertainment expenses
If you are traveling for business, then you can write off the travel and entertainment costs that are accrued on the trip. Why not plan your vacation in conjunction with the business trip, so that you can offset the tax burden and enjoy your vacation at the same time? Or, if you are planning a meal with employees or clients, make sure to track the spending for the meeting because you can write off 50 percent of the costs of the meal.
5. Track the use of your car
Whether you are driving for a few hours to a big event or conference or you are running to the bank to deposit a check, it is important that you keep track of the miles that are being put on your car. By tracking these expenses, you can take write-offs for the miles that are business related.
6. Health insurance costs
The cost of paying for health insurance can be deducted pre-tax, or you can have the business pay for the medical insurance premiums. Talk with your accountant about the best way to set up the insurance payments in order to maximize your tax benefits.
7. Structure your business right
Depending on the amount of money that you bring in each year, there are several different ways that you can structure your business. There are tax advantages to setting up your business as an S corp or a sole proprietorship, which is why you should talk with a tax specialist to understand the optimal structure for your individual situation.
As a business owner, you don’t have the time or energy to worry about tax laws and deductions. Instead of stressing about your taxes, it is better to hire a tax accountant to handle everything for you … so that you can focus on other important aspects of running your business.
Troy Martin is a shareholder at Cook Martin Poulson, a Utah accounting firm. He has experience in the following business sectors: medical, dental, manufacturing, retail, restaurants, construction, farming and ranching.