Unlocking Tax Savings: The Top 6 Deductions Every Small Business Owner Should Know

Are you a small business owner looking to maximize your tax savings? Trust me, you're not alone. I've had countless clients who miss out on tax savings because they've tried to cut corners or followed advice from friends and family who aren't well-versed in the tax code. This is where tax strategy becomes crucial. As a first-gen, millennial woman of color maneuvering the world of entrepreneurship, I understand how challenging it can be to navigate these murky waters. Fortunately, understanding tax deductions is key to keeping more money in your pocket, and I'm here to help. In this blog post, we'll explore the top six tax deductions that every small business owner should know about.

1. Home Office Deduction

If you operate your business from home, you may be eligible for the home office deduction. This deduction allows you to deduct a portion of your rent or mortgage, utilities, and other home-related expenses based on the percentage of your home used for business purposes. Be sure to keep detailed records of your home expenses to claim this deduction accurately.

2. Business Use of Your Car

Do you use your car for business-related activities such as client meetings, deliveries, or travel to and from job sites? If so, you may be able to deduct the costs associated with the business use of your car. This includes expenses such as gas, maintenance, insurance, and depreciation. Keep a mileage log to track your business-related travel and ensure you can claim this deduction.

3. Supplies and Equipment

I'm sure you know the drill - running a business means investing in all sorts of things to keep things running smoothly. Luckily, a lot of these expenses can be tax-deductible. We're talking office supplies, software, machinery, furniture – you name it. If your business is anything like mine, a ton of tools I use are online and subscription-based, from banking to website hosting. Just remember to keep those receipts for all your purchases to back up your deduction claims— it'll make things a lot easier come tax time!

PRO TIP:

Make sure to apply for a business credit card and use a business credit card to cover all business expenses. Not only does this protect your personal credit, but it also establishes your business as a legitimate entity. It's a win-win!

4. Professional Services

Did you hire a consultant, lawyer, or accountant to help with your business operations? The fees paid for professional services are deductible business expenses. Whether you're seeking legal advice, financial consulting, or tax preparation services, be sure to keep records of all payments made to professionals throughout the year.

PRO TIP:

Did you know that business banking fees, business credit card fees, and PO box fees are tax-deductible? That's right! Make sure to tally them up at the end of the year and give them to your tax professional. We want to make sure you don't pay a cent more than you should!

5. Health Insurance Premiums

If you're self-employed and pay for your health insurance premiums, you can deduct these costs on your tax return. This deduction can include premiums for medical, dental, and long-term care insurance for yourself, your spouse, and your dependents. Keep records of your insurance payments and consult with a tax professional to ensure you claim this deduction correctly.

6. Don´t Guess, Ask!

When it comes to tax codes, guessing is not the way to go! It's crucial to consult with your tax professional, stay informed, and do your reading. Making assumptions about tax laws can lead to costly mistakes, so it's always better to be sure. By seeking guidance from a tax expert, educating yourself, and keeping up with tax regulations, you can ensure that you're making informed decisions and staying compliant with the law.

In the grand scheme of things, getting a handle on these top six tax deductions can really put some extra cash in your pocket and ease your tax burden as a small business owner. Remember to always chat with your tax pro and never assume that even the tiniest business expense isn't deductible—just don't get too wild with it. We get it, tax laws can be a maze, so it's crucial to team up with a tax professional to make sure you're getting the most out of your deductions while playing by the IRS rules. By leveraging these deductions, you'll hang onto more of your hard-earned dough and keep your business blooming with confidence.

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➡️ Questions about your taxes and need to speak to a trained professional? Book a discovery call HERE. Se Habla Español.