Tax Breaks Every Small Business Owner Should Be Aware Of

Before deciding to open your own business, you weigh the pros and cons of entrepreneurship. The positives of being your own boss and controlling your destiny often outweigh the uncertainties of owning your own business. You may miss receiving a regular paycheck, but the upside is tremendous: time, flexibility, and the potential for higher income. An opportunity for which every entrepreneur should be aware is potential tax breaks for a small business owner. There are numerous financial benefits that every self-employed boss needs to know to help maximize their hard-earned dollars. Business owners in the hospitality industry follow a specified tax guide that takes advantage of tax breaks.

Below are practical suggestions for you to consider.* 

Congratulations, you may have started your business during the last tax period. Did you know that start-up business costs up to $5,000 may be tax-deductible? Many expenses, including market research to determine your business concept viability, are included in the list of approved deductions. Make sure to check the list. 

 If you are like most small business owners, your home quickly becomes your first and sometimes the only office. Did you know that some home office expenses can be written off on your taxes? The savings can be considerable, and instead of assuming the costs of monthly office space, you get to stay home and save money. The IRS provides ample information on determining the area you use for office purposes and how to file your tax return. 

Speaking of home office space, if you set up your area at home, you can also write off portions of your utilities – phone, electricity, gas, and cable. These expenses are likely to increase as your operation grows. You can deduct a percentage of these costs on your taxes as business use. Here is an important tip: keep detailed records and receipts for electric bills, utility bills, and repairs.  

If you use a car for business – say, picking up product at a facility or meeting up with clients for coffee – you can deduct the cost of mileage. At $0.56 per mile, the deductions add up. Again, critical to this tax advantage is keeping excellent records. Record each work trip (other than those that are to and from any out-of-home office) and the miles each work-related day. Your ability to quickly calculate the total miles each year should be well-documented and straightforward by keeping detailed records. 

Have dues or professional memberships related to your business? Deduct them! Only dues to professional organizations, trade associations, and chambers of commerce are deductible; dues to country clubs, airline clubs, and the like, even if the memberships are for business purposes, are not deductible. Joining industry groups can be valuable to your business growth, and the ability to deduct dues makes membership a positive investment. 

Entrepreneurs know that the more people who know about their business, the better. While costs for advertising and promotion – from signs to paid social media outreach – may seem prohibitive, the good news is that all marketing costs are 100% deductible. The list of approved items to expense is significant, so make sure you review your yearly expenditures and garner the tax benefits you deserve. 

As a business owner, you or one of your employees may want to take a course to expand or improve your skills. These types of investments may be deductible as long as the education does not qualify you for a new trade or business. 

If you're a parent and your children are twelve years of age or younger, you will be happy to know that childcare can be tax-deductible (dependent on your income level). If your spouse or another adult family member requires care, you may also be able to write off these costs. 

There are many advantages to starting your own business, including what you can now deduct as part of your new venture. Keep clear and accurate records and receipts. Make sure you separate personal from professional expenses. Note that deductions often change from year to year, and working with a tax professional can make the job easier or using the many online tools to streamline the process. 

* Remember that I am not a tax advisor, and your business has its own tax needs.  You should check with your tax advisor to determine what course of action is best for you.