When it comes time to pay Uncle Sam, you hunt for every tax deduction you can get as a
small business owner. Which entails rent, inventory, depreciation of equipment, and business miles, right? Unless, of course, some of those deductions are no longer valid, while others may have been added or changed.
Tax deductions can be a time-consuming and confusing process, and you don't have much time on your hands!
Don't worry—we've compiled a 2022 small company tax deduction checklist for you.
What steps may a small firm take to lower its taxable income?
Small businesses can claim 'ordinary and essential' tax deductions from the IRS. This means they must be standard expenses in your sector and necessary for your specific firm. What may these be, exactly? Let's gather all of the records and receipts and see what we can.
1. Getting Around
Some vocations, such as real estate agent, necessitate a lot of driving. If this describes you, you can claim 58 cents per business mile as a typical federal mileage deduction.
Keep all receipts and keep track of miles, petrol purchased, maintenance, registration fees, tolls, and parking if you choose to itemize costs. Then divide your overall mileage by your business mileage and subtract the resulting percentage from your vehicle expenses.
2. Expenses for Travel
You can deduct your expenses if you're going out of town for business purposes. This includes airfare, rail, bus, rental vehicle, Uber, Lyft, taxis, hotel, and food, among other ordinary and necessary expenses. Keep all records and receipts, once again.
3. Business Lunches
Business dinners, whether in or out of town, are deductible to the tune of 50%. It's a 100 percent deduction if you throw a party for your staff. It's 0% if you're entertaining a customer and don't mention business.
4. Initial Investment Expenses
You might deduct up to $5,000 if you launched a business in 2021. The deductions must be related to the establishment of your business, the formation of your business entity, and the preparation of your business for launch. If you start a retirement plan for your employees, you can deduct $5,000 more over the next three years.
5. Commercial Insurance
There's a good chance your company has insurance, and it's 100 percent deductible.
You can deduct 100 percent of the expense of renting a space for business purposes if you are not gaining equity or title to the property.
Any marketing and advertising expense that is entirely for the purpose of earning or keeping business is 100% deductible. Expenses for lobbying for legislation, on the other hand, are not deductible.
You can deduct depreciation if your company owns and operates equipment that loses value over time. Allow your tax attorney or CPA to assist you in determining the annual rate of depreciation.
If you paid for training sessions for your staff or yourself, including travel, you can deduct such expenses. The training in question should, once again, be "common and necessary" for your sector and organization.
10. Office Equipment
Supplies required to run a business are entirely deductible. Ink cartridges, pens and paper, computer software, website hosting, and cleaning supplies are among them.
When deducting office supplies, however, you must meet three IRS rules:
You won't be able to keep track of when the materials were used.
You don't keep track of your supplies at the start and end of the year.
These deductions have no substantial impact on your business income.
11. Health-Care Tax Credit for Small Businesses
If you have less than 25 full-time employees and provide health insurance, you can deduct half of their premiums, with smaller businesses getting additional credit.
12. Utility Services
Heat/air conditioning, energy, telephone, water, and sewage expenses can all be deducted if they are for commercial purposes.
13. Compensation and Benefits
You can deduct all of your employees' salaries, commissions, and bonuses if you have one or more.
14. Donations to Charity
If you make a financial donation to a qualified charity, you can deduct all of your charitable contributions.
When stating what products are tax-deductible for small enterprises, this is sometimes overlooked. If you've set up your own retirement plan and it's tax-qualified, it's totally deductible.
16. Bad Debt in the Business
You can deduct this 'worthless debt' if you sold products or services to a customer on credit and were unable to collect payment.
17. Work from Home
As more people work from home, the types of deductions available to small business owners have evolved. If you have a home office, divide the square footage of that office by the total square footage of your home and subtract that amount from your rent. You can deduct the same amount from your utilities, and if you have a separate business phone line, you can deduct it completely.
When it comes to filing small business taxes, LegalShield is the way to go.
You already have enough on your plate without having to worry about an audit. We specialize in small business legal services at LegalShield, and you may speak with an experienced tax lawyer who will double-check your paperwork. LegalShield plans are cost-effective for any company, regardless of size or income. Contact Haletek Industries and become a member today!
Most Commonly Asked Questions
What may you deduct from your taxes as an LLC?
You can claim the same small company tax deductions as everyone else. Just make sure you're filling out the relevant tax form for your company.
What is the business tax deduction of 20%?
You can deduct up to 20% of your net business income from your taxes if you have income from a pass-through firm. To see if you qualify, speak with your tax lawyer or CPA.
What can a small business deduct?
If you're wondering what small business deductions you can take, be sure these expenses are 'ordinary and necessary' for your company. One of the most costly mistakes made by small businesses is making ineligible deductions. Before you file, make sure you speak with a tax attorney.