When you own your own business, you know how important it is to get as many tax deductions as possible. That’s why we’ve created a list of the top 7 business tax deductions to save you the most money.
- Home Office Deduction
- Office Supplies Deduction
- Office Furniture Deduction
- Insurance Premiums Deduction
- Startup Expenses Deduction
- Social Security Deduction
- Travel Deduction
If you work from a home office or work area within your home and only use that space for work and nothing else, then you may be able to deduct it from your taxes. Measure your work area and divide it by the square footage of your home. You can then deduct the percentage or fraction from your rent, mortgage, insurance, electricity, or any other expense.
Hang on to any receipts that prove you bought office supplies for your work. These purchases offset your business income so they can be deducted.
You have a choice to deduct 100% of your office furniture in the year it was purchased or deduct a portion of the expense over seven years, also known as depreciation.
Self-employed people that are paying their own insurance premiums can deduct 100% of the cost. This tax deduction is primary for proprietorships, but it has its limits. The deduction can not be more than your business’ net profit. It also can’t be deducted if you were able to get health insurance through a spouses job.
It’s possible that you could deduct your startup expenses for your business such as advertising, transportation, consultation fees, travel, employee training and wages, and legal and accounting fees. You can deduct up to $5,000 for startup costs and up to $5,000 for organizational costs. If your deductions are over $55,000 then you have to set up an amortization schedule in order to deduct the costs.
If you’ve owned your own business for a while, you know that anyone that is self-employed has to pay the full 15.3% of your net profits to social security. Employees have to pay half and the employer pays half, but since you are both, you have to pay the whole thing. The good news is you can deduct half of it on your 1040 form.
The travel deduction doesn’t mean you can deduct your gas costs for getting to work because you choose where you live in relation to your work. What it does mean is you can deduct your travel expenses for business trips. This means transportation and lodging are 100% deductible, while meals can only be deducted at 50%.