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The time to determine which small business tax deductions you can use is not when you turn financial documents over to your tax team. It’s right now

The sooner you identify and track potential tax deductions, the better off you will be. You can skip the stressful parts of tax time and:

  • Avoid combing through your records.
  • Stop stressing out about remembering your expenses.
  • Start leveraging tax deductions that can save you money.

With the right knowledge and planning, you can sit back and relax while your records do the work.

By highlighting expenses that decrease your tax liability all year long, you can easily submit your deductions and in some cases, decrease the amount of taxes you owe.

Start by Tracking ALL of Your Small Business Expenses

Even if you know what small business tax deductions to use, it will be difficult to leverage them if you aren’t tracking them.

The only small business tax deductions you can use are the ones you track. 

If you don’t track business expenses that can be used as deductions, you will likely miss the benefit of using them. It is much easier to get all potential deductions when you have accurate, up-to-date bookkeeping.

To get the most tax deductions, set up a plan to track expenses throughout the year so you can easily identify deductions at the end of the year.

  1. Keep your receipts. When you make a purchase that can be used as a deduction, hold onto the receipt. Keep the paper receipt, save receipts in your email, and/or use a tool to scan and save receipts.
  2. Enter your expenses into software. Use an accounting software that allows you to track and categorize expenses. Instead of a spreadsheet, use a professional tool such as Quickbooks or Xero, or similar system.
  3. Use a dedicated business credit card or bank account. Make it easy to monitor your business expenses by using a dedicated business credit card or bank account. Reconcile the account each month to ensure that all expenses are entered into your accounting reports.
  4. Track all of your business expenses. Get in the habit of tracking all of your business expenses, whether you think they are deductible or not.

If you aren’t currently tracking all of your business expenses, use this free guide to get started.

6 Small Business Tax Deductions You Might Be Missing

Here are a few small business tax deductions that are easy to overlook. Don’t forget to use these deductions this year.

#1) Home Office Expenses

Business owners who work from home can deduct expenses related to their office space. You can expense the square footage of the space as well as some expense to improve or maintain the space (such as the cost of furniture, new paint, professional cleaners, etc.).

To deduct expenses for a home office, it must be used solely for business purposes.

#2) Cell Phone (& Internet)

If you are a small business owner who uses your cell phone for both business and your personal life, you can still deduct part of the expense.

Track how often you use your phone for business purposes. Remember, this isn’t just making calls. It’s also posting on your social media channels, checking your email, responding to text messages, etc. If you use your phone for business 50% of the time, deduct 50% of the bill.

If you work from your house, use the same formula to deduct your internet expenses.

#3) Vehicle Expenses

If your small business requires you to get in a vehicle and go somewhere, you may have deductions to consider. You can use the standard mileage rate (a formula for determining how much to deduct) or an actual expense method.

Vehicle deductions also include costs incurred while on the road such as parking fees and tolls. This does not include driving to your office, but it does include driving:

  • To meet clients
  • To make purchases or run errands for your business
  • To and from the airport for business trips

Remember, if you are taking ride-share for any of these purposes, you can also write off those expenses.

#4) Retirement

In some cases, small business owners can pay themselves and deduct it. Some contributions to retirement plans are fully or partially deductible. Consider opening or contributing to:

  • Traditional IRA
  • Self-employed simplified employee pension (SEP) plan
  • Solo 401(k)

#5) Education

If you learned something new this year, it could also be deductible. Expenses on education may deductible. This includes going to workshops, seminars, trade shows, conferences, and training events.

It also includes materials that you use to stay informed about your industry or to enhance your related skills, such as books and industry magazine subscriptions.

#6) Credit Card Fees

Credit card fees are a cost of doing business, and they can add up. One benefit is that credit card fees are deductible. Keep track of your processing fees, because as you know, they can add up.

Note that credit card processing fees are deductible for business only. If your customers regularly pay via credit card, don’t overlook this small business tax deduction.

What To Do if You Aren’t Sure if Something Is Deductible

It’s no secret that the tax code can be painfully complex at times.

But don’t ignore an expense because you are unsure if it is deductible. Always track everything. 

If you aren’t sure if it is deductible, enter it with a category or a note to look into it. A professional tax partner can help you determine if it is fully deductible, partially deductible, or not deductible at all.

Recommended Reading: 7 Reasons to Start Year-End Tax Planning Right Now

Stop Missing Tax Deductions

Tracking all of your expenses and identifying every potential small business tax deduction is how you can decrease your tax liability and potentially lower the amount of taxes you owe.

Make sure your business is getting the most benefit from the tax code.

Work with a financial partner who can help you employ better bookkeeping practices so you never miss an expense. Find a tax preparation partner who can answer any of your deduction dilemmas.

Get both with CFO2U. See how CFO2U can help you get your books in order and expedite your tax filing this year.

Schedule a free discovery call to see how we partner with businesses to help them maximize income, decrease expenses, and keep more money in the business.

Susan Nieland