Common Business Expenses and Tax Deductions
Business expenses are costs associated with operating your business. It’s always a good idea to consult a professional tax preparer and accountant with specific questions about writing something off as a tax deduction. Here are some examples of common business tax deductions., according to NerdWallet.
Advertising and Marketing
The U.S. advertising industry was projected to reach a record-high of $352 billion in 2023, according to Statista data. High revenue like this suggests that many business owners advertise and market their company’s products and services to attract customers.
Things like business cards, flyers, billboards, radio and TV ads, and fees to a graphic or web designer to design your business logo or company website are examples of deductible business advertising and marketing expenses.
Office Supplies
Pens, pencils, paper, printer ink, shipping boxes, and packing tape are just a few examples of office supplies you might need to run your business. Even though these items are small, they are tax deductible.
Equipment and Machinery
The type of equipment you need for your business varies according to the products and services your company offers. Lease and purchase costs for computers, printers, copiers, company vans and trucks, and refrigerators are examples of tax-deductible equipment and machinery. In some cases, you can also write off equipment depreciation. Consult a tax professional with specific questions and clarification.
Office Furniture and Fixtures
Desks, chairs, sofas, tables, bookshelves, and light fixtures (e.g., in offices, bathrooms, warehouses, and breakrooms) are deductible business necessities.
Software and Subscriptions
Any software and subscriptions you need to operate your business are tax-deductible. This includes Microsoft Office, Square, proprietary business software, and subscriptions that pertain to your company.
Vehicle Expenses
Whether it’s a designated company truck or your own car, you can deduct business-related vehicle expenses like gas, mileage, and truck rental fees when using a vehicle for business purposes. The IRS sets a yearly standard mileage rate for business use. The 2023 business rate is 65.5 cents per mile. Remember to keep track of business mileage throughout the year to claim this deduction.
Building Rent, Utilities, and Insurance
Whether you own a clothing store, restaurant, or distribution company, you can fully deduct the amount of rent you pay to lease your business space. You can also deduct utility expenses like electricity, water, heat, air conditioning, internet, and sewage costs. You can also claim insurance costs like property, malpractice, company auto, and business owner health insurance.
Cost of Goods Sold/Inventory
If your business manufactures products or buys them to resell, you can deduct the costs you incur to make and sell them. These costs include raw materials, production worker labor costs, storage, and factory overhead, to name a few.
Business Travel, Training, and Meals
When you travel away from your company for more than an entire workday for business reasons, you can deduct travel expenses like airfare, car rental, and hotel and meal costs. You can also write off fees for a professional seminar, job training, or required certifications.
Employee Salaries, Bonuses, and Benefits
Business owners can deduct employee wages, salaries, bonuses, and commissions. You can write off employee benefits such as education assistance, qualified retirement accounts, accident and health plans, life insurance, vacation pay, and uniforms.
Tax Season Tips: Maximizing Your Business Tax Deductions
Preparing for tax season can feel overwhelming. Following these tax season tips can streamline the process and help things go more smoothly.
Work with a Tax Professional
Understanding business tax deductions, tax rules, forms, and even how to classify your business (sole proprietorship, corporation, LLC) is challenging for many business owners. An expert tax professional can offer critical guidance on business tax deductions that eliminates guesswork and costly mistakes for tax season.
Keep and Gather Accurate Financial Records
To reduce stress and simplify the tax filing process, keep accurate records of your company’s income and expenses all year long. Before you meet with your tax advisor, gather income statements, expense reports and receipts, bank and credit card statements, payroll records, and depreciation schedules.
Know Tax Filing Deadlines
Knowing the tax deadlines and filing on time helps prevent penalties for filing late. The 2023 tax filing season starts Jan. 29, and the deadline for most taxpayers is April 15, 2024, according to the IRS.
File All Necessary Forms
To avoid penalties and processing delays, make sure you file all the necessary tax forms that accompany your personal 1040 return. These forms can include:
- Schedule C (sole proprietor) – To report business profit and losses.
- Form 1120 or 1120S (corporations – To report income, gains, losses, credits, and deductions.
- Schedule K-1 (partnerships) – To report income, losses, and business expenses. Companies typically file this form with Form 1065.
- Other forms – Your tax preparer can also advise if you need to file other common forms to report, like depreciation, self-employment tax, and estimated taxes.
Endeavor Business Experts: Claiming Your Business Tax Deductions
Endeavor Business Broker’s team of business experts are knowledgeable in various business areas. Feel free to contact us at (424) 238-0897 to schedule a consultation at your convenience. We look forward to helping you!
—
Along with business sales, Endeavor Business Brokers’ President, Drew Carney, is also a licensed REALTOR®. If your business also owns the real estate it sits on, Endeavor Business Brokers has the tools and experience to help you with every aspect of the transaction!
