Tax Write-Offs for

Business Owners

Tax Deductions for Small Business

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15 Tax Write-Offs for Small Businesses

Small business owners tend to wear many hats. They’re chief executive, finance, operations and marketing officers rolled into one. With lots of roles to perform, tax preparations and documentation can be taxing not only for your time but also for your bill. That’s why many entrepreneurs are looking for tax saving measures like income exclusion, tax credits, and deductions.

Of the three, tax deductions, also known as tax write-offs, are the easiest to take advantage of as they are readily available.

What Are Tax Write-Offs?

Tax write-offs are a form of tax avoidance which deducts eligible business expenses from your gross income before arriving at your taxable income.

Tax Write-Offs vs. Tax Credits

Tax write-offs differ from tax credits in that, the former are deductions on your gross income while the latter are direct deductions on your tax liability. To put it simply, write-offs reduce your tax base to arrive at a lower tax liability.

Uncommon Tax Write-offs

Here are some business expenses which you can claim as deductions on your gross income:

  1. Self-Rental: Many small business owners do not pay themselves rent for the use of the space for business purposes. However, this creates a problem because you won’t be able to deduct the building’s operating expenses to the extent of the rent from your business’ income because the building has generated a passive loss. Thus, you cannot deduct this from your business's gross income which leaves you with higher tax liability. The best practice is to have your business pay monthly rent for the office space as this is a deductible business expense. The Internal Revenue Service requires that self-rentals be charged at a “fair market value” rental rate.
  2. Advertising: Expenses such as printing business cards, social media ads, print or digital advertisements, etc. are deductible.
  3. Home Office Deduction: To qualify, you must use the home office area regularly and exclusively as your principal place of business, a place to meet or deal with clients or customers, or as a separate structure used in the business.
  4. Qualified Business Income Deduction (QBI): 20% of qualified business income can be deducted from the owner’s personal tax return.
  5. Startup & Organizational Costs: You can deduct up to $5,000 in startup costs and $5,000 in organizational costs (such as incorporating) incurred in the first year of business (but only if costs did not exceed $50,000 in total). The remaining costs (up to $40,000) are amortized over 15 years.
  6. Membership Dues: Dues from professional and business-related organizations, i.e. chambers of commerce, civic organizations, trade associations can be claimed as deductions.
  7. Franchise and Trademarks: If you buy a franchise, trademark, or trade name, the amount you paid or incurred as a business expense, with certain stipulations, is deductible.
  8. Cancellation Fees: If you booked a business trip and had to cancel and reschedule, the airline rescheduling fee, as well as the hotel deposit you lost, are deductible.
  9. Credit Card Convenience Fees: A small business that uses credit cards can deduct convenience fees charged by the card companies.
  10. Education Expenses: Ordinary and necessary expenses paid for the cost of the education and training of the owner(s) and employees are deductible.
  11. Business Mileage: You can take the standard mileage deduction for business trips using your personal vehicle. Just be sure to keep a log of the date, beginning and ending odometer, and business purpose for the trip.
  12. Business Use of Cell Phone: You will need to calculate how much you use the cell phone for business purposes, i.e. business calls, checking business email, texts with clients/customers, posting to the business’s social media accounts.
  13. Parking Fees and Tolls: When traveling for business purposes, these are deductible.
  14. Health Insurance Premiums: If you have an individual/family health plan (cannot be a group plan) and pay your healthcare premiums out-of-pocket without tax breaks or subsidies you can possibly deduct the premiums.
  15. Petty Cash Expenses: Keep all receipts for business expenses you pay cash for.
Next Steps

Taking advantage of tax write-offs is where the real challenge begins, so here are a few tips:

  1. Keep good records by properly categorizing and filing the receipts for all of your expenses. This will make it much easier to identify which expenses are tax-deductible.
  2. Familiarize yourself with tax laws related to small businesses to know what expenses are tax-deductible and which are not.
  3. Consult with a tax professional if you have any questions or concerns. They can help you ensure that you are taking advantage of all the tax deductions available to you. At MBE CPAs, we have business tax experts who can guide you through the process and help you save thousands of dollars. Talk to us today!