Tax Deductions for Small Businesses

If you’re starting a small business, you need to be familiar with some easy-to-apply tax deductions that can help you save some money.

Mileage Tax Deductions

Did you know that if you use your personal vehicle for business, you can deduct that business use? However, you have to keep track of the mileage. To do so, use a mileage log and choose one of the following. You can deduct your mileage from your taxes at the rate of 58 cents per business mile in 2019. You can also deduct the actual expenses you incur while driving for your business.

Writing Off Your Phone

Do you use your personal cell phone for business? You can deduct a percentage of your phone costs based on how much you used the phone for business. If the phone is all business, then you can deduct 100% of the costs.

Of course, you always have to remember that whatever you choose to deduct is subject to IRS audit.

Home Office Tax Deductions

Do you do work related to your business from a dedicated space in your home like an extra room or a section of a room? You can deduct that too.

You base your deduction on the percentage of the square footage of the home office divided by the square footage of the whole house. Remember, the dedicated area must only be used for business related purposes.

Once you have figured out the percentage, you multiply the amount you spend on items like utilities, rent, real estate taxes, mortgage interest and homeowners insurance by the percentage. This will give you the amount you can deduct. For example, if you use 10% of your house for business use, you can deduct 10% of the costs of your home. 

Saving on Retirement Contributions

Is your business profitable? If so, consider a business retirement plan. With this plan, you can transfer business funds to a retirement account, within certain limits. You are entitled to a business deduction for money that you invest. The catch is you can’t access the funds until you are 59 1/2.