5 Overlooked Small Business Tax Deductions
As a business owner, you may be aware of many tax breaks you are eligible for. But this doesn’t mean you are taking full advantage of the tax deductions available to you. At The CFO Source, our Maryland tax accountants work with many businesses to maximize their deductions and provide peace of mind during tax time. Here are some of the overlooked tax deductions we frequently come across when advising our clients.
Most equipment you use to run your business starts depreciating the moment you buy it. The IRS allows you to deduct the cost of depreciation up to a certain annual allowance. This deduction applies to real estate, vehicles, equipment, machinery and even furniture. Even some intangible property like computer software can be subject to depreciation.
In order to claim a depreciation deduction, you need to make sure that your property:
- Is owned or leased by you.
- Is used for your business.
- Has a “determinable useful life” of more than 1 year.
You can also depreciate the improvements you make to your business assets. Depreciation deduction is often scheduled to be used over a certain number of years depending on the type of property. And because every business often has hundreds of assets that can be depreciated, preparing for this deduction can take time. But don’t skip it just because it’s time consuming—let our Maryland tax accountants help you take advantage of the depreciation deduction.
Business Trip Expenses
If you travel for business often, you know that expenses can add up fast. There’s airfare, hotel rooms, internet access, cab rides and many more little fees that tend to accumulate. If you are the only person who travels for business in your company, be sure to document everything, including how a specific bill can be justified as a business expense. If you have employees who travel for business, make sure they keep a good record of all their bills, so that you can later reimburse them on a per diem basis. Keep in mind that the IRS has updated its per diem allowances for 2015 and removed some costs from the allowed list of incidental expenses.
Home Office Deduction
If you are one of many small business owners using their home as an office, you are probably aware of the home office deduction. And like many you are probably hesitant to use it because of the fear that the IRS will come after you with an audit. When a home office deduction is done right and you truly qualify for it, this shouldn’t raise any red flags for the IRS. The tricky part is making sure that you qualify—feel free to speak with one of our Maryland tax consultants if you have doubts.
Gas mileage is one of those deductions everyone is aware of, but many business owners choose not to bother with. Most of us combine business with pleasure, using the same car for everything. At the end of the day, calculating how many miles you traveled for client meetings is probably not what you want to do. However, keep in mind that modern technology has made accounting for your business expenses much easier. There are numerous apps that allow business mileage tracking with a push of a button. Now you have no excuse not to use the mileage deduction.
Just starting out? Did you know that you can deduct certain expenses that you incurred before officially being in business? That’s right, the IRS recognizes expenses of “going into business,” such as costs of advertising, marketing research or hiring employees. These are considered capital expenses and in most cases can be deducted. Even if you started a business and it failed, you should still be able to claim these deductions.
Have other questions about making the most of your 2015 tax returns? Give us a call or contact us online for Maryland tax advice.