Smart tax planning for small business can save you a fortune. That’s why it’s so important to find those overlooked small business tax deductions.
I’m all in favor of paying my fair share when it comes to taxes. But if you’re like me, you and the government have very different ideas of what “fair” means. As a result, it’s up to us to do everything we can to keep our taxes low.
And if you want to keep the size of government as small as possible, keeping taxes low is one way to do it. From that standpoint, maximizing tax deductions is your patriotic duty! No doubt about it, taking advantage of available tax breaks is a great small business strategy.
So, without further delay, here are the 8 most overlooked tax planning ideas you need to start paying attention to in order to make your small business more successful:
1. Your Wheels
Most people know they can use their car as a write-off if they use it for business. What you might not know is that you can use a standard mileage rate or your actual expenses to calculate the write-off. Of course, you’ll have to keep track of all your expenses in order to do this, but it could be a savvy move. If you go this route, you can also claim depreciation on the car. Nice.
Either way, make sure to keep track of the miles you use for business purposes.
2.”Start Me Up” Expense
You can deduct up to $5,000 of start-up expenses in the first year of operation. If your costs were higher than $5,000, you can expense the remainder over 15 years.
3. Up Up and Away
Make sure to visit clients or vendors when you vacation. You can deduct the cost of the ticket, other travel expenses, lodging, food…just about everything…as long as it’s related to business.
Just remember that you can only deduct a portion for yourself when you travel with your family if your family members aren’t part of the business.
If you need to borrow money for your business, you have many alternatives. If you take out a personal loan but use the money for business, you can deduct the interest as a business expense.
5. Heavy Metal
Section 179 of the IRS Code allows you to deduct as much as $25,000 of any money you spend for business equipment in 2014.
6. Highway 61
If your business needs to relocate – and you do too – you can deduct some of the moving costs on your 1040. Your new business location has to be at least 50 miles farther away from your old home than your old business.
7. School’s (NOT) Out for Summer
If you incur an expense to sharpen your skills and those skills are needed for your current job, you can deduct them.
8. Working for a Living
If you have a child going to college, give her a job instead of tuition money. Let her work for you on weekends and during vacations. Then, she’ll use the money she earns to pay for college. This way, the money you would have spent to pay for college (and get no tax benefit for) gets distributed as taxable income to your child (in a low bracket) and it’s a deduction for you. If you are in a high tax bracket, this works out great. You get a valuable deduction and it shifts income to your child, who is likely in a lower tax bracket. This is sort of like making tuition payments tax-deductible. Sweet-a-licious.
Even if you have an accountant prepare your small business tax return, make sure to investigate these and other ideas and ask your tax professional for advice.
What other tax deductions have you tapped into that can help benefit other small business owners?