Running a small business comes with many responsibilities, from managing operations to keeping an eye on your finances. One area that often gets overlooked, however, is tax deductions. Many small business owners leave money on the table simply because they aren’t aware of all the deductions available to them. In this blog, we’ll cover 21 overlooked small business tax deductions that you should ask your CPA about to save money and optimize your tax strategy.
Paying taxes is inevitable, but reducing your taxable income through legitimate deductions can significantly improve your bottom line. Small business tax deductions are expenses allowed by the IRS that can reduce your taxable income. These deductions are particularly valuable for startups and small business owners looking to reinvest in growth.
By understanding the full range of potential deductions, you not only save money on taxes but also improve cash flow and maintain better financial health for your business.
If you operate your business from home, you may qualify for the home office deduction. This deduction includes a portion of your mortgage or rent, utilities, internet, and maintenance expenses.
Tip: Ensure your home office is exclusively used for business to meet IRS requirements.
Many small business owners use their personal vehicle for business purposes. You can deduct mileage, fuel, insurance, and maintenance costs. Use a mileage log to track your business travel accurately.
Pens, paper, printer ink, and other office essentials are fully deductible. Even minor expenses, when tracked throughout the year, can add up.
You can deduct 50% of business-related meals and certain entertainment expenses. Keep receipts and documentation showing the business purpose to avoid issues with the IRS.
Fees paid to accountants, attorneys, and consultants directly related to your business are deductible. Hiring a CPA or legal expert can be costly, but the deduction reduces your taxable income.
Health insurance for yourself, employees, and general liability insurance premiums are deductible. Proper coverage protects your business and your finances.
Expenses for social media ads, website design, SEO services, and traditional marketing campaigns are deductible as long as they are business-related.
Airfare, hotels, taxis, and other travel costs for business purposes are deductible. Keep detailed records and separate personal and business expenses.
Contributions to a SEP IRA, Solo 401(k), or SIMPLE IRA are deductible, lowering your taxable income while helping you save for retirement.
Payroll, health benefits, and bonuses for employees are fully deductible. Offering benefits can also help you attract and retain top talent.
Courses, seminars, and certifications that improve your business skills are deductible. This includes online classes, workshops, and industry-specific training programs.
Business-related software subscriptions, cloud storage, and online tools like accounting platforms or project management apps are deductible.
If you have loans or lines of credit for business purposes, the interest paid on these debts is deductible.
Rent paid for office space, warehouse space, or equipment leases can be fully deducted.
Electricity, water, internet, and phone services used for business are deductible, especially if you work from home.
Large purchases like computers, office furniture, or machinery can be depreciated over time to spread the deduction across several years.
Business bank account fees, credit card fees, and other service charges are deductible.
If a client fails to pay for services rendered or products sold, you may be able to deduct the amount as a bad debt expense.
If your vehicle is used exclusively for business, you can deduct depreciation as well as standard mileage or actual expenses.
Donations made by your business to qualifying charitable organizations are deductible. Keep documentation for every contribution.
Gifts to clients or customers are deductible up to a certain amount per recipient per year. Always document the business purpose of the gift.
Keep detailed records: Receipts, invoices, and logs make it easier to claim deductions and survive audits.
Separate business and personal expenses: Avoid mixing personal and business finances.
Work with a CPA: A qualified tax professional ensures you don’t miss deductions and stays compliant with IRS regulations.
Use accounting software: Track expenses automatically and categorize deductions for accuracy.
Small business owners often overlook valuable deductions that could save them thousands of dollars. From home office expenses to business travel and marketing costs, every deduction counts. By asking your CPA about these 21 overlooked deductions, you can reduce your tax liability and reinvest more into your business.
Remember, careful planning and accurate record-keeping are key to making the most of your deductions without raising red flags with the IRS.
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