Business Owners Keep More of Your Hard Earned Income Legally and Tax-Free

Put More Money Back in Your Pocket Now With These 23 Deductions That Save You Tens of Thousands of Dollars!

We don’t have to convince you that taxes can be complicated—especially for small-business owners. As a responsible tax-paying citizen and a small-business owner, we know it for a fact!

But not paying attention to your taxes could cost you big-time—especially if you’re not sure which small-business tax deductions you’re eligible for. And Uncle Sam doesn’t exactly give you a road map here. So allow me to help you out.

Here’s what you need to know: The IRS considers anything “ordinary and necessary” to run your business as a tax-deductible expense. So, paint brushes for an artist? Yes. Getting your hair done so you can look jazzy on your Zoom calls? Not so much . . . unless you’re an entertainer. Still not sure what qualifies as tax-deductible? We got you! We’ll help you understand what you can write off as a business expense on your tax return.

For Small Business Owners there Are 21 Small-Business Tax Deductions You Need to Know to Not Pay. Many business owners don’t take full advantage of available tax deductions. Below there are some you won’t want to miss.

Many business owners don’t take full advantage of available tax deductions. Here are some you won’t want to miss.

The 23 Small-Business Tax Deductions Checklist That Save You Tens of Thousands of Dollars

Certain expenses are specific to the kind of business you run. But we’ve put together a check list of common deductible business expenses that apply to most small-business owners. Are You taking these deductions?

1. Qualified Business Income
2. Home Office
3. Rent
4. Advertising and Marketing
5. Office Supplies and Expenses
6. Software Subscriptions
7. Office Furniture
8. Utilities
9. Repairs
10. Inventory (Cost of Goods Sold)
11. Auto Expenses
12. Energy Efficiency Expenses
13. Travel
14. Business Meals
15. Salaries and Employee Benefits
16. Freelance or Contracted Labor
17. Employee Gifts
18. Education
19. Taxes
20. Insurance
21. Legal and Professional Fees
22. Bad Business Debts
23. Debt Interest

The 23 Small-Business Tax Deductions Explained

1. Qualified Business Income

The 2018 tax reform law changed how deductions work for most taxpayers—including small-business owners. Under the tax law, most small businesses (sole proprietorships, LLCs, S corporations and partnerships) can deduct 20% of their income on their taxes. 

Here’s what this means: Say your small business generates $100,000 in profit. You can deduct $20,000 before ordinary income tax rates are applied.

But hold up! There are a few limits that could prevent you from claiming this deduction. The biggest obstacle is the income limit that applies to some high-income business owners. Think lawyers, doctors and consultants. Once your income exceeds that limit (in 2024, the Qualified Business Income Deduction limits are $241,950 for single filers or $483,900 for pass-through business owners who are married filing jointly) this deduction starts to phase out

Wait—pass-through business owner? That all sounds pretty complicated, but it’s simpler than it seems. A pass-through entity is just a small business (shout out to the   LLCs and S corps) that don’t have to pay corporate income taxes. The small business we own is a pass-through entity as well (in our case an S corporation). Basically, how it goes down is the business owner pays the taxes at their personal rate. Look, just reach out to a tax pro to see if you’re eligible for this pass-through entity deduction.

2. Home Office

Did you rearrange the spare room in your house or apartment into a home office space? You’ll probably be able to deduct some expenses if you’re using your home for business. This includes mortgage interest, insurance, utilities, repairs and depreciation. Aye, that’s what I’m talking about. Come on and get this money back! The simplified version of this deduction also allows small-business owners to deduct $5 for every square foot of their home office—up to a max of 300 square feet.²

But wait! The IRS allows you to claim this deduction only when you use your home office exclusively for business purposes on a regular basis. So if your office doubles as a guest room for your mom when she’s in town, that won’t fly.

3. Startup and Organizational Costs

Our first small-business tax deduction comes with a caveat — it’s not actually a tax deduction. Business startup costs are seen as a capital expense by the IRS, since they are an investment in your business (the money hasn’t actually left the business, it was just transformed into an asset).

Deductions for capital expenses typically occur over several years. This is known as amortization, and helps businesses accurately assess profitability year over year. You can check out chapters seven and eight of IRS Publication 535, which covers business expenses for more information.

4. Inventory

Some inventory-based businesses will manufacture products or purchase them for resale. If this is your business model, you can deduct the cost of your inventory, or the cost of the goods you sell. You generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold.

The following are types of expenses that go into figuring the cost of goods sold:

* The cost of products or raw materials, including freight.

* Storage.

* Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products.

* Factory overhead.

5. Utilities

Any utilities that you use for your business are fully deductible. This includes things like water, electricity, trash and telephone bills. However, if you have a home office and use a landline, the cost of the first landline is not deductible, but subsequent landlines are.

6. Insurance

Most businesses will take out some form of business insurance. The cost of the business owner’s health insurance, business continuation insurance and the business owner’s policy are all 100% deductible.

Other types of deductible insurance policies include property insurance, liability coverage, malpractice insurance, workers’ compensation costs, auto insurance, business provided employee life insurance and business interruption insurance.

Note that with health insurance, a small business may also qualify for up to a 50% tax credit under the qualified small employer health reimbursement arrangement, known as QSEHRA.

7. Business Property Rent

If you rent your business property, you can deduct your lease or rental payments from taxes. Alternatively, if you run your business from home, you can also run an eligibility test with the IRS to see if you are entitled to any deductions.

Types of deductible home business expenses include mortgage interest, insurance, utilities, repairs and depreciation. You can learn more through IRS Publication 587.

8. Auto Expenses

If you have a car for business purposes, you can usually deduct anything considered a car expense. However, you have to have records that prove business usage, as well as keep track of your miles.

Conversely, you can rely on the IRS standard mileage rate: For the first half of 2024, this rate was 65.5 cents per mile.

If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463 on travel, entertainment, gift and car expenses for more information.

9. Rent and Depreciation on Equipment and Machinery

If you lease equipment or machinery for your business you can fully deduct these costs. This can be anything from printers and copiers, to vans and trucks. You can also claim depreciation on equipment and machinery. However, these costs must be deducted over several years with a Section 179 deduction.

10. Office Supplies

Paper, boxes, pens, staples — they may be small, but they all cost money (which you can deduct from your taxes).

11. Office Furniture

Office furniture is also considered a type of office supplies, and can, therefore, be deducted just as you would deduct printer paper or cleaning products.

12. Software Subscription

If you’ve bought or downloaded software for your business, this can be deducted. These types of expenses can be claimed under “Other Common Business Expenses>Other Miscellaneous Expenses” on your Schedule C tax form.

13. Advertising and Marketing

As long as you can prove they’re related to your business, you can claim back any money spent on ordinary advertising and marketing purchases. This includes things like billboards, business cards, Yellow Pages ads, as well as hiring a freelancer to design a business logo or sending thank you cards to clients.

14. Business Entertainment

Entertaining clients with meals and events? This, too, can be deducted if necessary to your business.

Note that most meal costs are only deductible up to 50% (this was raised to 100% for 2022). But certain types of meals, such as a meal provided at an office party, are 100% deductible. Be sure to save your receipts and note the business purpose of the meal in order to maximize this deduction.

15. Travel Expenses

If you’re frequently on the go, you should definitely look into deducting your travel expenses. For a business expense to qualify as travel, it must be away from the city or area in which you conduct business. You must also be away from your tax home for longer than a full workday. Types of deductible travel expenses include airfare, tolls, taxis and lodging.

16. Interest

If you have a small-business loan, you’ll make interest payments on what you’re borrowing from the lender. Those interest payments are usually fully tax deductible as long as the loan is used to cover business expenses.

To claim this deduction, the business owner must be legally liable for the debt, and the business owner and the lender must have a “debtor/creditor” relationship. In other words, the loan must be through a traditional lender, and not a friend or family member.

17. Bad Debt

If you’ve ever lent money to an employee or vendor without receiving it back, you can claim that back as ‘bad debt.’ You just need to be able to prove that it was business debt, rather than personal debt.

The IRS defines bad debt as “a loss from the worthlessness of a debt that was either created or acquired in a trade or business or closely related to your trade or business when it became partly to totally worthless.” The following are examples of business bad debts (if previously included in income):

* Loans to clients, suppliers, distributors and employees.

* Credit sales to customers.

* Business loan guarantees.

18. Taxes

As strange as it sounds, the taxes you incur from just running your business are deductible. These taxes might be federal, state and local income, real estate or sales taxes. Your employer taxes, such as the employer share of FICA, FUTA and state unemployment taxes, are also fully deductible.

19. Employee Salaries

In general, your employee wages are fully deductible. This includes bonuses and commissions. However, this deduction does not apply to sole proprietors, partners and LLC members, because these individuals are not considered employees.

20. Employee Benefits Programs

You can also deduct certain employee benefit programs, like education assistance, dependent care assistance, life insurance adoption assistance or qualified retirement plan accounts. For self-employed individuals, contributions to their own retirement plans are personal deductions claimed on Form 1040.

21. Employee Gifts

Employee gifts are 100% deductible up to $25 per year, per employee, according to IRS Publication 463.

22. Contracted Labor

Do you use independent contractors or freelancers as a part of your labor force? The cost of hiring contracted labor is fully tax deductible. Note that you must issue form MISC-1099 to any contract worker receiving $600 or more from you in a given tax year. If the employee is being paid via credit card or PayPal, the payment processor must issue the worker form 1099-K.

23. Legal and professional fees

If you ever need to hire a legal or accounting professional for your business, you can deduct 100% of their fees.

NOTE: How to Claim Small-Business Tax Deductions

To claim small-business tax deductions as a sole proprietorship, you must fill out a Schedule C tax form. The Schedule C form is used to determine the taxable profit in your business during the tax year. You then report this profit on your personal 1040 form and calculate the taxes due from there.

FOR EMPLYEES HERE ARE 2 LEGAL WAYS

1. Have You Ever Considered How Can You Pay Less Income Tax on W2 Income?

There’s not too much you can do to pay less income taxes on W-2 (day job) income. Itemize your deductions, donate to charity, and relocate to one of the nine no income tax states are the main strategies. Hence, the best way to pay fewer taxes is to earn more investment income or start a business.

2. Have You Ever Considered How Much Tax You Need To Pay Based On a W2 Tax Bracket?

If you are in the 10-12% TAX BRACKET you pay zero percent tax on long term capital gains and qualified dividends up to about $46,000. There’s not too much you can do to pay less income taxes on W-2 (day job) income. Itemize your deductions, donate to charity, and relocate to one of the nine no income tax states are the main strategies.

CONCLUSION

Contact, join us and we’ll help you FREE to overcome the brutal truths about taxes.

We’ll help you with a FREE, Proven and Easy a Step-by-Step Formula and Process to to overcome the brutal truths about life, business and taxes and get you the real financial results you want. Can’t wait to hear what you accomplish this year!

Live Long and Prosperously,

Reitenbach-Kissinger Institute
Sydney and Michael
Text: 650-515-7545
Email: mjkkissinger@yahoo.com

Review:

1. MKS Master Key Coaching: mksmasterkeycoaching.com

2. 15 Books That Made Us Wealthy: Listen for Your Financial Success: https://lnkd.in/gPVxcf3J

By Michael Kissinger

Offers Results Only Coaching: Exceptional Profit Results-Proven Strategies and Universal Law Skills in Management, Marketing, Operations, Finance Every Business Owner Wants-Needs to Achieve Their Essential Transformation

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