Don't Forget About These Three Often-Missed Small Business Tax Deductions

Tax time is upon us! As you're finalizing your returns, be sure you're taking advantage of all the deductions available to you. To help you along the way, we're here to remind you of three often-forgotten tax deductions that can have a big impact on your bottom line, especially for small businesses. Claim them if you qualify and keep more money in your pocket. 

Here are 3 deductions to look into and see if you qualify:

The Home Office Deduction

According to the IRS, there are two basic requirements for your home to qualify as a deduction:

  1. Regular and exclusive use.
  2. Your home must be the principal place of your business.

There are two ways to calculate the business use of your home. The first is based on the actual expenses, which will require you to calculate the business portion of your mortgage, rent and utilities, and the second is a standard deduction of $5 per square foot of your home used for business (maximum 300 square feet). To find out more about the home office deduction, take a look at the additional details available on the IRS website

Note: This deduction can be trick due to the exclusive use provision. Your home office must actually be a dedicated space that you only use for your business. Your kitchen table or a corner of your living room that your kids also color in won't count, but that spare bedroom that you set up a desk and your work computer in is more likely to qualify.

Startup Costs Deduction

The IRS allows you to deduct up to $5,000 in costs related to starting your business. There are three categories of startup costs that qualify for this deduction, and you can only deduct them if you actually opened the business.

The three categories are:

  1. Creating a trade or business or investigating the creation or acquisition of an active trade or business.
  2. Anything involved in preparing the business to open. This includes travel costs to distributors or suppliers, training employees and advertising and consultant fees.
  3. Organizational costs such as legally setting up your business as a partnership or corporation. 

Find out more specifics about how the IRS handles these expenses in Publication 535.

Bank Fees

If you have a small business, you should also have a separate small business bank account. With that bank account also comes a second set of banking fees. These fees can include charges for checking accounts, ATM withdrawals, and other bank-related services, as well as interest charges, overdraft fees, and accounting fees. All of these banking fees for your business bank accounts are fully deductible as business expenses.

Feel free to contact us with any questions about opening a home-based business, and feel free to post your comments or questions below.


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