We found an awesome article written by Steve Nicastro, a staff writer at NerdWallet. We wanted to share his useful information with you for this, and future tax seasons. For his full article, visit Nerdwallet.com
If you fail to claim your small business tax deductions, you could be losing out on a good amount of money. Deductions are a legal way of reducing the amount of income from your business that is subject to tax.
How can I make sure I’m always on top of this?
Keep a record! Always save receipts, invoices, and any other documents. You can deduct salaries and wages, mortgage interest and taxes, office supplies, repairs and insurance, and depreciation of property. Here are 5 commonly missed deductions.
- Home Office Deductions:
If you have a room in your home that you regularly use as a place of business to deal with patients, clients, or customers, you may be able to claim a home office deduction on your income taxes. If you are also using the room as a place for guests to stay, this could disqualify you. For more information about this, visit Home Office Deduction.
- Carryovers:
Depending on how profitable your business was, you may be able to carry back the loss 2 years for a refund, or carry it forward up to 20 years to offset your future taxable income. This, however, has many moving parts and it is best to consult a tax professional to look at your specific circumstance. For more on this, the IRS provides comparison methods.
- Start-up Expenses:
You may deduct up to $5,000 in start-up costs, and $5,000 in organizational costs. However, both deductions phase out when your total start-up expenses reach $50,000. If you exceed the $50,000, no first-year deduction is allowed and you will need to amortize you costs over the next 180 months of operation.
- Losses & Bad Debts:
The IRS defines a bad debt as one that was acquired in your business and became partly or completely worthless. This can include loans to clients, suppliers, employees, distributors, and debts of an insolvent partner. They become bad debts only after you’ve tried to collect the amount due over a reasonable period and have taken the correct steps to do so.
- Tax, Legal & Educational Expenses:
Expenses that are necessary and directly related to your business such as fees paid to your accountant and lawyers are deductible. However, legal fees that are paid to acquire business assets are not deductible.
Business Resource Partners understand these and countless other tax prep necessities. Our tax professionals are happy to assist you now, and in the future with your business and tax needs.
Call us at (321) 236-2771 or visit 310 Almond Street Clermont FL, 34711.
We look forward to serving you!