Nothing is ever sure in business — except for taxes, that is. Whether or not it’s a banner year for your Nashville enterprise, you can expect a bill from Uncle Sam.
Without the help of a CPA firm, however, many small and medium-sized enterprises (SMEs) fail to take advantage of tax breaks designed specifically for them. As such, they end up paying more taxes than they absolutely have to.
What are these tax deductions and are you missing out on them?
Qualified Business Income
There’s no secret that taxes take a big chunk out of your profits. There’s hope, though, as the Tax Cuts and Jobs Act of 2018 offers some much-needed reprieve. If you’re a small business owner, you can deduct up to 20% of your net business income from your taxes. What does this mean? If you bring in $1,000,000 in profits, you can write off the first $200,000 before normal tax rates apply. Do note, however, that this benefit lasts only until 2025 (unless extended by Congress), so apply for it while it lasts.
Business doesn’t always happen in expansive offices. For many small business owners, a spare bedroom also acts as their home office. The good news? You can deduct your mortgage interest from your business tax. Even better, overhead costs like repairs, insurance, and equipment depreciation can also be deducted. You can deduct up to $5 for every square foot of your home office, but only if it is exclusively used for business purposes. If your office also doubles as a guest bedroom, this benefit is forfeited.
Travels and Meals
Business and travel go hand in hand. In fact, Americans make over 400 million business-related trips per year. And when you finally reach your destination, you’ll likely need to conduct business meetings with partners or potential clients over lunch. Needless to say, that’s a lot of money spent on airfare tickets and food. You’d be glad to know, however, that travel costs are fully deductible as a business expense. Meals, meanwhile, can be deductible up to 50%, provided of course that the amount is reasonable. The key takeaway? The next time you have to travel for work, bump yourself up to first class — you deserve it!
Good healthcare is important but it does come at a cost. Luckily, small business owners who pay their healthcare premium out-of-pocket (without any government subsidies), can deduct their annual payments from their tax obligations. That said, you need to be a sole proprietor, a partner, or a shareholder who holds more than 2% of the company’s stock. If your spouse is also an employee in your company, this deduction applies to them, too.
Of course, crunching numbers on your tax form may not be your forte. With the different hats you have to wear, you can’t be expected to also serve as your own accountant.
Luckily, Evan Hutcheson can review your business’ finances to spot tax-saving opportunities. Get in touch with him today to take advantage of tax deductions that can boost your cash flow.
23 Common Tax Deductions for Small-Business Owners, RamseySolutions.com
5 Tax Breaks Overlooked by Small Business Owners, Investopedia.com