A tax deduction are expenses the business incurs that can be used to reduce their tax bill. More specifically money spent that is used on goods and services with the sole purpose to be used in providing the service or production of goods.
What are tax deductions
Qualifying for enough tax deductions can bump you down to a lower tax bracket. Since the laws of taxes is the more you make, the more you get taxed. But tax deductions lowers your “income” on paper so therefore the income that is left over won’t be taxed at such high rates
So claiming every expense you can is so crucial
What kinds of expenses qualify as business expenses
Expenses incurred to run the business
- Things you use exclusively in operating your business. For example, a landscaper uses sod and mulch to provide landscaping services. A dog training service needs leashes, collars, and treats.
- Things you use exclusively for your business in the space where your business operates. If you rent office space, the utility costs you incur are a business deduction.
- Things you use while doing business. If you use your car to drive to client meetings, you can deduct the round-trip mileage as a business expense.
What are the most common tax deductions for small businesses
- Accounting and tax prep software
- Advertising fees
- Business supplies
- Delivery and shipping cost (everything associated with moving product)
- Home office (you take the size of your home office, you take the total size of your home and then whatever percentage that is you can deduct)
- Independent contractors
- Marketing fees (any materials used to get eyeballs to your business)
- Meals and entertainment (you can only deduct %50 of the cost)