Tax Deductions Every Business Owner Needs to Know About

If you are a small business owner, you know the big costs of running a business. Thankfully, most of these expenses can be considered for a tax write-off. The IRS generally considers expenses as deductible if they are “ordinary and necessary” to running the business. This is open to interpretation and will vary from business to business, but there are some common deductions that might apply to your small business. Keep reading to see which tax deductions can apply to your 2019 tax year and which deductions you can implement into your business plan in 2020.

1. Rent and Utilities

If you rent an office, a store, a factory, or any other kind of business property, you can fully deduct the cost of renting the space. Likewise, every dime you spend on utilities, including electricity, phone, internet, water, heat, and sewage, is fully deductible. You can also include any repairs to property or regular maintenance like fresh paint.

2. Car and Truck Expenses

If you use a vehicle to conduct your business, you can deduct the cost of operating the vehicle for business purposes. If you don’t know exactly how much you spent on car-related expenses, you can use the IRS standard deduction at 58 cents per mile for 2019. In order to get this tax write off you will need a record of your business mileage.

3. Salaries and Employee Benefits

Any payments to employees—including bonuses, commissions, contributions to retirement plans, education assistance, or other employee benefit costs—are all tax deductible. This also applies to any freelancers or contract workers you may hire to meet your business needs.

4. Advertising and Marketing

Anything you use to promote your business can count as a write-off. Business cards, t-shirts, billboards, radio spots, boosted social media posts—all 100% tax deductible.

5. Supplies and Expenses

Supplies you need to run your business, from every day office supplies (like printer ink and post-it notes) to items more specific to your business (like tools if you are a mechanic or hair products if you are a stylist) are tax deductible. If you’ve bought new electronics or software that you use for your business, those costs are write-offs as well.

6. Travel

If you or an employee have to travel for the business, you can write off the cost of transportation and lodging for the trip. You must meet the substantiation requirements set out by the IRS to prove the trip was for business purposes so it is a good idea to keep track of any costs you accumulate on your travels. This does not include local and regular commuting.

7. Home Office

If you use a home office to work from home while running your business, you can most likely deduct the expenses for the business use of your home. Keep in mind that this only applies to a home office that is used on a regular basis exclusively for business purposes. This can include mortgage interest, insurance, utilities, repairs, and depreciation. The IRS standard is $5 for every square foot of office space, up to 300 square feet.

8. Insurance

The cost of insurance premiums used to protect your business are deductible. This includes malpractice and liability insurance, fire and flood insurance, and business continuation insurance, among other things. Under specific circumstances, medical insurance for your employees can also be tax deductible.

These are just a few of the write offs and deductions available to small business owners. If you are a small business owner, make sure you are getting the most out of your tax returns this year!