Save Money: A Guide to Tax Deductions for Businesses

Tax Deductions for Businesses

A tax law overhaul in 2018 created a new business deduction that resulted in 14 million Americans claiming this new small business deduction. It’s business deductions like this one that you need to know to give your business the best chance for success. Otherwise, you’re spending money that you don’t need to. 

Learn about these valuable tax deductions for businesses and take control of your company’s financial status. 

How Do Tax Deductions Work for Small Businesses?

A write-off is an expense that your business has that you can claim as a deduction on the business tax filing. Expenses are any costs that your business incurs during the course of running the business for profit. A write-off is also called a business deduction, which is an IRS-approved expense that a business can use to reduce its total tax income liability. 

How to Claim a Business Tax Deduction 

If you want to claim a particular tax deduction, you need a Form 1040 Schedule C. This is the primary form used because it’s designed for small businesses. The form has a long list of possible deductions, such as professional fees, advertising, office expenses, travel, and meals. 

Common Small Business Tax Deductions 

There are a few tax deductions that most business owners can claim. For example, if your business uses a vehicle, you can claim the standard mileage rate or the actual expenses of the vehicle. 

If you have a home-based business, you’ll need to file Form 8829. This form helps you calculate what percentage of your home is used for business. You can then claim this portion of the home as a tax deduction. 

Supplies, equipment, and furniture are all expenses that you can claim. You must keep all of your receipts for these purchases. If the IRS asks you to verify your claims, you’ll need these to prove your expenses. 

Are Donations Tax Deductible for a Business?

There is no simple answer to this question. The intricacies of the law can lead to a web of regulations that require the assistance of a tax professional like to help you decipher the law. There is a fine line between actual charitable donations and those that look like a donation on the surface but really aren’t. 

In many situations, a business receives a benefit from the donation. Because of this, it isn’t a charitable donation. However, the benefit could be intangible, such as free marketing for increased brand awareness. 

The rules are just as complicated for cash donations. So instead of trying to correctly determine on your own, it’s best to work with a professional. That way, you don’t risk making an incorrect determination and exposing yourself to future tax liability. 

Take Your Tax Deductions for Businesses

If you own and run a small business, you need to know what’s available to you. Tax deductions for businesses will benefit you by reducing the tax liability that your business owes the IRS. Not making these claims means you’re paying more in taxes than you need to. 

Learn more about how to manage your company’s finances by checking out our other business articles.