A Definitive Guide to the Top Business Tax Deductions

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August 24, 2020

On average, small businesses pay an effective tax rate of 19.8%.

Since this is an average, some businesses will pay less, and others more. If you want to be one of the businesses that are paying less, then you need to make the most of your business tax deductions.

There is a wide range of business deductions available. Although not every business can claim every deduction, there may be some that you are missing out on.

Read on as we take a look at some of the top business deductions available.

Home Office Deduction

If you use a home office for your business, you can deduct a portion of your home expenses against business income.

There are two ways to do this. The standard method involves tracking all of your housing expenses and multiplying this by the fraction of your home that is devoted to your business. If this is too complex, you can use the simplified method which allows you to deduct $5 for every square foot of your home office, up to a maximum of 300 square feet.

Office supplies and office furniture are also deductible although the costs of assets are typically spread out over the years that you will use them due to depreciation rules.

Insurance Expenses Deduction

You can also deduct expenses relating to business insurance.

Policies such as liability coverage, business owner's insurance, and malpractice insurance are all deductible. The deduction cannot be more than your net profit, however.

Advertising and Promotion Expenses

The cost of promoting and advertising your business is also fully deductible.

This includes costs such as printing business cards, sponsoring events, or even launching your website.

Salaries and Benefits

You can also make tax deductions for salaries and benefits provided they meet certain criteria.

It does not apply if the employee is a partner or sole proprietor. Any salaries or benefits paid must be reasonable and necessary, and the services for which the salary or benefits are paid must have been provided.

Other Deductions

These are some of the top business tax deductions, but there are many, many more.

The list includes:

  • Legal and professional fees
  • Startup expenses
  • Social security
  • Travel expenses
  • Business meals
  • Bank fees and interest
  • Internet and telephone expenses
  • Education
  • Business use of a vehicle
  • Business rent
  • Depreciation
  • Repairs

As you can see, the list of business deductions is an extensive one. That's why it's so easy for small businesses to overlook deductions that they could be claiming.

Are You Looking to Maximize Your Business Deductions?

There are many different business deductions that you may be able to make. Keeping track of exactly which deductions you are eligible for can be a challenge.

If you're looking for support with your business tax deductions, then we're here to help. Our team can help you implement the best tax planning strategies whilst maintaining compliance and managing your tax liabilities. We can help your business maximize tax deductions and credits.

Contact us today to see how we can ensure that you don't miss out on any tax deductions that you're eligible for.

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