Tax Deductions for Small Businesses

Getting a small business off the ground and running is a feat in itself, and the thought of keeping track of income and deductions might make it owning a business additionally overwhelming. Fortunately, identifying your tax deductible business expenses is easier than you might think, as a wide variety of ordinary and necessary expenses towards running your business can qualify for a tax deduction. Here are some of the most common tax deductible expenses of small business owners.

Travel and Transportation

This can include air and public transportation to and from business-related events, and it can even include 57.5 cents per business mile driven in your car. In the case of travel to other cities, you can include common travel expenses like hotel accommodations, rental car costs, parking meter fees, and dry cleaning. Dining out meals are also tax deductible, but only by 50 percent.

Home Office

If your small business operates out of a home office that is dedicated to running your small business and nothing else, the expenses involved in its setup can be tax deductible. Measure the square footage of that workspace and divide it by the square footage of your home in order to calculate the fraction of home expenses that your office makes up. You can then include that fraction of mortgage, rent, insurance, and electricity in your tax deductions.

Office Supplies and Furniture

Similarly, you can include the office supplies you purchase for your home office, including writing utensils, postage and packaging supplies, electronics (yes, that includes a work-dedicated computer), and furniture. Don’t forget to include equipment such as a printer, fax machine, or scanner, as well.

Advertising

Advertising expenses for promoting your business—be they magazine spots, online ads, or print campaigns—also count toward your tax deduction.

Education

Various education expenses qualify for tax deduction, including industry-related magazine subscriptions, audio tapes, and online courses. Keep in mind here that education that would qualify you for a new job isn’t tax deductible; it must be directly related to your current occupation.

Employee Pay

Compensation to your employees for the services they perform for your business is also generally tax deductible.

Keep in mind when determining which expenses are tax deductible that you cannot count personal, living, or family expenses. And in those cases when you might use something for both business and personal purposes, deduct only the business portion of that expense.