9 Small Business Deductions That Could Save You Money

Do you own a small business? If so, you know how tough it can be to keep expenses under control. From employee taxes, insurance and maintenance fees to vendors and advertising costs, running your business can put a strain on your finances. Luckily, there are plenty of ways that operating a small business can help you save money instead of costing you money. You just need to know where to look. Here are 10 common small business deductions that could help you out this tax season.

Rent, lease or purchase your workspace

Renting space is one of the most expensive ways to operate your business. Depending on the type of space you’re using, renting could cost you anywhere from 5% to 40% of your monthly income. Although you might have a lease that ends at some point, you’re still paying for the space. Owning your own space, on the other hand, can be a real money saver. Depending on the size of your space, you could end up spending less than 1% of your income on rent. Plus, you’re not tied down to a lease, which could leave you more flexible and open to making changes in your business. It’s worth noting, though, that owning space does come with a few headaches that you don’t get with renting. If you need to make adjustments to your space—like expanding your workspace or adding staff—you have to deal with the added expense of remodeling. Another upside to owning your space is that you can use that space as collateral to secure a loan.

Depreciation

When you buy something, you get to deduct a certain amount of the cost as an asset right away. That’s called depreciation. The amount you can deduct depends on the type of asset you are depreciating, how long you expect to use it and how often you use it. The less often you use something, the less you can deduct for its wear and tear. For example, if you buy a computer that’s being used 10 hours a day, you can deduct 50% of the purchase price. If you end up using the computer only four hours a day and never again, you’re only allowed to deduct the remaining 4% of the purchase price. Depreciation is a great tax deduction for businesses because it helps you get a dollar value for your assets, which means your business is taxed at a lower rate. It’s also an important part of your accounting records and tax returns. Depreciation helps you track your assets, which helps you make better decisions about when to purchase new ones.

Employee benefits

There are few things that can hit your take-home pay harder than an increase in payroll taxes and federal income taxes. That’s why it’s so important to keep track of all of your employee benefits. Some of these benefits could be 100% tax-free, while others might be worth 25% or 50% of your income. Take the cost of insurance, for example. In most cases, employee benefits are considered taxable income, and you’re expected to report them on your tax return. Some of your benefits might be worth as much as half of your take-home pay. Take the cost of your employees’ health insurance, for example. Your employees might be able to deduct their share of the premiums from their taxes. If you don’t provide health insurance to your employees, they can still deduct their share from their taxes. Every benefit you have that’s worth something comes with its own set of rules and regulations, so make sure you understand what you can and can’t deduct.

Taxes and fees paid to government agencies

Many small business owners are surprised to find out how much they’re paying in taxes. But the cost of doing business—including payroll taxes, federal income taxes and state income taxes—isn’t the only cost you need to look out for. There are also fees and taxes you have to pay to government agencies. Some of these taxes and fees come as a surprise. For example, if you own a restaurant, you might not know about the 3.4% employer tax that’s applied to tips. You might also be surprised to find out how much you’re paying in other taxes. A common tax that many small business owners don’t know about is the medical expense tax. The medical expense tax is a percentage tax that’s applied to the cost of health insurance.

Advertising and marketing costs

Many small business owners are tempted to skip the costs of advertising, but that’s a mistake. If you want your business to be successful, you need to put some effort into marketing. There are a number of ways you can invest in marketing to save money on taxes. One option is to create a pre-sales strategy, which involves testing out the demand for your product. Another option is to partner with a marketing agency. As long as you stay within your budget, a marketing agency could help you save money on taxes by conducting A/B testing and adjusting your strategy. Marketing is one of the most expensive ways to operate your business, and it can also help you save tax money by reducing customer acquisition costs and boosting sales.

Office supplies and maintenance fees

You might think that you have to charge your employees for the cost of paper, pens, coffee and other office supplies. But that’s not the case. In most cases, you can deduct the cost of these items from your taxes. Office supplies are one of the most common expenses deducted from a company’s income tax return. This tax break can be worth as much as 10% or more of your income. You also might be able to deduct the cost of maintaining your office. This includes things like utilities, maintenance, cleaning and repairs.

Incentive programs for employees and contractors

In many cases, you can deduct the cost of bonuses paid to employees and contractors. This tax break can be worth as much as 20% of your income. All you have to do is document the cost of bonuses, such as signing bonuses, salary and payroll taxes and any related business travel expenses. You can also deduct the cost of hiring contractors. This includes the cost of paying a contractor for services such as building repairs, renovations and construction.

Safety costs for your employees

Many people don’t realize that the cost of safety equipment is tax deductible. This includes things like safety helmets, gloves, high-vis vests and construction equipment to protect people from hazards. The cost of safety equipment must be directly related to providing a safety service. This means that the cost of safety gear must be incurred as a direct result of providing a safety service, such as repairing a hazard or guarding against a fault in your equipment. You can’t simply take your company’s small bulldozer and call it a safety tool. The cost of equipment would need to be directly related to providing a safety service.

Final tips

There are plenty of small business deductions that can help you save money. These include renting your workspace, owning your workspace and depreciation costs. You can also deduct the cost of hiring employees and contractor costs. Before you take any deductions, though, make sure you’re actually saving money. Some deductions can help you save tax money, but they also come with a cost that’s directly related to providing a service.