In this article, we will look into the 5 best tax deductions for small businesses. If you want to read our detailed analysis, you can go directly to the 20 Best Tax Deductions For Small Businesses.
5. Vehicle Costs
Vehicle costs are among the best tax deductions for small businesses. Small business owners can deduct vehicle expenses on their tax return. If a vehicle is used for personal and business needs, the costs must be divided based on the mileage for personal and business use. The deductible car expense can be calculated using the standard mileage rate method and the actual expense method. It is vital to determine the deduction method with a larger deduction if a business qualifies for both. The standard mileage rate method utilizes the standard mileage rate of 67 miles/cent in 2024. On the other hand, the actual expense method considers gas, oil, insurance fees, license, repairs, and depreciation attributed to the miles driven for business needs.
4. Internet and Phone
Small business owners can also claim phone and internet expense deductions. IRS provides a 100% deduction of the expenses of a second cell phone used exclusively for business purposes. However, it must be noted that the primary landline of a home is non-deductible, with an exception for long-distance business calls. If a single phone is used for personal and business purposes, the taxpayer must keep a record of business calls to claim for deduction. Small businesses with a retail store or office space dedicated to the business can claim a 100% deduction for internet services. The percentage of service used for business needs must be calculated before claiming a tax deduction.
3. Business Insurance
Small business owners can claim tax deductions for business-related insurance products. Business insurance premiums for general liability, professional liability, commercial property, workers’ compensation, health and life, and business interruption insurance are some of the policies that qualify for an insurance tax deduction.
2. Advertising and Marketing
Any kind of promotion made to increase the market of the business can be listed as a business expense. Examples of advertising and marketing include digital ads, print ads, posters, banners, and business cards. Expenses for marketing and business development used to expand a small business’s clientele may be deductible from taxable income. Advertising and marketing deductions are among the best tax deductions for small businesses.
1. Travel Expenses
Travel expenses refer to the necessary expenses for a business trip away from home. According to the IRS, small business owners can claim a travel expense deduction if their business requires them to be away from their general tax area for an extended period.
Travel expenses related to a temporary work assignment away from the general area of the business can be deducted. However, travel expenses for a work assignment of an indefinite or unknown period cannot be deducted.
Travel costs related to conventions are deductible if a proof of benefit to business can be provided. Usually, the travel expenses include costs incurred by traveling via airplane, bus, train, or car to a business destination, taxi fares, shipping, personal car used to travel to the business destination, and other modes of transportation. A small business owner can claim a travel expense deduction on Schedule C of Form 1040.
You can also look at 20 Easy-to-Start Small Businesses That Could Elevate Your Income and 15 Most Valuable Languages to Learn for International Business.
