Small Business Tax Deductions You Should Be Claiming

by Sean Bryant on May 2, 2012

If you are a small business owner you may be paying more in taxes than you need to be. All business owners should be aware of the small business tax deductions available to them. This could end up saving you thousands of dollars each year. If you have an accountant they should be able to guide you in the right direction, but you need to make sure you have all of your receipts to give them.

Home Office

No matter if you work out of your home or you have your own office, that expense is tax deductible. If you have a home office, the area of the room that you work in is the only amount you can deduct. Let’s say for example that your home office is 15% off the total square footage of your house. That means you can deduct 15% off the cost of your rent, mortgage, electricity, insurance, heating, ect.

Furniture

If you purchase a new office desk, filing cabinet or any other office related furniture you can deduct the cost of this from your taxes. You can do this in one of two ways. The first way is by taking a 100% deduction in year one and the second way is that you can depreciate it over seven years.

Office Supplies

All of your pens, printer paper, ink cartridges, ect are items that are tax deductible.

Office Equipment

Just like your office furniture you can get a tax write-off for any office equipment you buy such as new computers, printers, scanners, ect. You can either take the full deduction in year one or you can depreciate it out over five years.

Travel Expenses

If you take any business trips you can write off all of that. You can deduct 100% off your travel and hotel but only 50% of your food.

Insurance Premiums

If you are self employed than you are most likely paying for your own health insurance premiums and that can be a huge expense here in the US. The good news is that they are a 100% small business tax deduction.

Retirement Funds

If you are self employed there is a good chance you might have signed up for a SEP-IRA. If so all of your IRA contributions are tax deductible.

Car Milage, Parking

If you have to drive to a business meeting than you can deduct the miles driven in your car at a rate of $0.55 per mile. You can also deduct any parking fees associated with the trip.

Final Thought

While having all of these small business tax deductions is nice you need to be aware that you can only deduct an amount equal to or less than your profits.

Do you know of any other small business tax deductions that you would like to add?

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Sean Bryant

Sean Bryant created OneSmartDollar.com in 2011 to help pass along his knowledge of finance and economics to others. After graduating from the University of Iowa with a degree in economics he worked as a construction superintendent before jumping into the world of finance. Sean has worked on the trade desk for a commodities brokerage firm, he was a project manager for an investment research company and was a CDO analyst at a big bank. That being said he brings a good understanding of the finance field to the One Smart Dollar community. When not working Sean and he wife are avid world travelers. He enjoys spending time with his daughter Colette and dog Charlie.
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  • I really wish I ran my own business right now so that I could go to fincon and write it off haha. My BF is trying to start up his own online business, surprisingly it’s in the financial services industry so maybe just maybe – next year I will get to go to fincon13 and claim it.

    This is a really handy list though, and one I will bookmark for future references… we need to write off all that we can!

    • Hey Erika,

      Even if you just run your blog as a self proprietor you can still write off business expenses. You just can’t write off more than you earn. You guys need to come to FinCon12, it’s amazing here in Denver in September 🙂

  • Also be sure to include internet and cell phone expenses. I noticed you said that you could only claim 50% of your food during business travel, does that still apply if you turn those meals into business meetings?

  • It’s pretty interesting how many people over take and under take tax deductions relating to work expenses. No home office for me, but I definitely work with my CPA to make sure I don’t leave any legitimate tax deductions on the table.

  • I’m glad to hear you’ll be at FinCon this year! Hope to meet up with you there. 🙂

    A quick tip about the home office deduction, I like to take a photo every year of the office area. Sometimes people move or the office changes and it’s easier to prove to the IRS if they ever ask (home office deduction is one of the top red flags for audits).

    Also, just to clarify a little, you can only claim 50% of your business meals, but most tax software calculates this in half. Be sure to put the 100% figure into the program or you might end up with 25% deduction instead.

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