Every year, businesses across the country miss out on potential tax deductions that can save them money. Whether due to lack of knowledge or failing to claim a deduction, many businesses leave money on the table at tax time.
Paying taxes can be a stressful process for businesses of all sizes. That’s why it’s important to know about the different tax deductions that can help you save money. It’s easy to overlook important deductions because the tax code is so complicated and constantly changing.
With a few key tips, you can make sure you don’t miss out on all your business tax deductions. Below, we will look at some of the biggest business tax deductions missed every year and how you can maximize them.
Top 4 Missed Business Tax Deductions
To maximize business tax deductions it is important that companies are aware of the various details of the tax code. Let’s review these details and the top four missed business tax deductions missed each tax season.
- Business Expenses Deduction
One of the most commonly missed deductions is the business expenses deduction. This applies to necessary business expenses such as rent, office supplies, equipment, travel costs, or advertising and marketing costs.
This deduction is often overlooked because many people are unaware they qualify for it. Business owners may simply fail to track their expenses throughout the year, missing out on this deduction when filing their taxes.
Business Mileage Deduction. If you use your car for business purposes—such as making deliveries, picking up supplies or meeting with clients—you may be able to deduct related expenses from your taxes. The Internal Revenue Service (IRS) allows taxpayers to deduct up to 54 cents per mile driven for business purposes. Additionally, parking fees and tolls paid during business trips are also deductible if they are not reimbursed by an employer or client.
Equipment and Vehicle Expenses. If you use any equipment or vehicles in your business, those expenses are deductible against your taxable income. This may include computer equipment, printing supplies, vehicles such as cars and trucks, furniture, tools, or machinery. These deductions also apply to leased equipment (leasing allows you to deduct the entire cost of leasing instead of just the portion used in the current year). You should keep track of how much each item costs so that you can accurately report these expenses when filing taxes for your business each year.
- Home Office Deduction
Another common deduction is the home office deduction. This includes both full-time and part-time employees who use their own home as their primary place of work or business. The deduction is based on the percentage of space used in relation to the total square footage of your home. It can help reduce your taxable income by deducting expenses related to the upkeep of your home office.
The home office deduction allows for the deduction of household expenses when using part of your home solely for work-related activities. Household expenses may include things like utilities, rent/mortgage interest and property taxes associated with using the space as an office. To take advantage of this deduction you must use the space exclusively for work as your primary place of business.
- The Cost Segregation Deduction
The cost segregation deduction allows businesses to accelerate depreciation on assets. By breaking them down into smaller components and assigning shorter life spans for each, in order to reduce taxable income in earlier years and defer some income until later years when income may be lower than normal or even non-existent due to losses or other factors. This can be a great way for businesses with large investments in long-term assets, like real estate or equipment purchases, to reduce their current tax bill while still taking full advantage of depreciation over time.
- Employee Benefit Deductions
Employers can receive a tax break for providing employee benefits such as health insurance, medical care reimbursement plans and flexible spending accounts (FSAs). Employer contributions towards these types of benefits are usually 100% deductible from taxes paid at the federal level and often at the state level as well. Additionally, employers who offer educational assistance programs can also benefit from a tax break since amounts paid by employers to cover an employee’s tuition expense are deductible from taxable income at both the federal and state levels, when applicable laws are complied with properly.
Maximizing Your Business Tax Deductions
Taxes can be complicated, but there are ways to get ahead by taking advantage of certain deductions available to businesses yearly. It’s important to stay up-to-date on changing taxation laws and regularly review your finances to take advantage of these valuable opportunities.
Due to the various forms to fill out and rules to follow, it’s easy to miss out on potential deductions. It pays to know all about these business tax deductions before filing taxes each year. This way you can ensure that you are taking advantage of all available write-offs that could potentially save you time and money in the long run.
With some research and proper documentation of all related expenses throughout the year, any savvy business owner or entrepreneur should be able to maximize their write-offs come tax season. From home office deductions to employee benefit write-offs, there are plenty of ways businesses large and small can take advantage of these often overlooked deductions each year. Through careful planning and attention to detail, you can maximize your tax savings and keep more money in your pocket!