Every small business owner should be on the lookout for deductions.
But there are a few common ones that lots of owners overlook. Here are three you might be missing out on:
1. Automobile expenses
Often, small business owners just think of tracking their gas receipts and using the actual expense method as a deduction on taxes.
But by only tracking your gas receipts you could be missing out on one huge deduction: Mileage.
This is a second way to deduct your automobile expenses, in which you take a deduction for each mile you've driven.
Tracking and deducting the miles you drive for business can get you a significant deduction. For example, in 2015, businesses were able to deduct 57.5 cents per each mile driven. That can really add up quickly!
As an important note, every business owner should track their mileage, regardless of the deduction method they choose to use. Why? Because knowing miles driven on the vehicle substantiates business use of the vehicle.
So which automobile expenses method should you use?
There can be advantages to either method! Come give us a call or visit to find out how to make the most of your automobile expense deduction.
2. Office in home deduction
If you have a dedicated space in your home you regularly use for business, you could potentially take a deduction on that space.
There are two ways to calculate a home office deduction:
The first is called the Safe Harbor method, where you measure your square footage and multiply it by $5 per sq ft, capping at 300 sq ft or $1500. This deduction is based on how large the space is that you’re working out of and is the simplest method.
The second way is to calculate the square footage of your dedicated work space as a percentage of your home’s total square footage, then take the deduction for the corresponding percentage of home costs like utilities, rent, repairs, etc.
Depending on your situation, one of these methods will likely end up being more beneficial than the other. To help you look at all of your options, speak with a tax expert.
As an additional note: There’s an old superstition that still floats around here and there that including an office-in-home deduction is an automatic red flag for IRS audits. But we’ve never seen any evidence to support that fear. Taking a home office deduction is a great small business deduction that many owners miss out on.
There are a LOT of expenses that go into getting a business started.
Purchasing equipment, buying software, or getting a website up and running are all common costs incurred before your business launches.
But all too often small business owners neglect to consider those startup costs for a tax deduction.
Even if you don’t have a bank account for your business and are purchasing everything from a personal account, keep track of those receipts!
Make a spreadsheet, start using QuickBooks, or find another method that works for you. Keeping track of those expenses will let you take them as a business deduction when tax season rolls around.