Prior to COVID-19, people viewed their tax refunds as a sort of bonus—extra money to spend on wants instead of needs. But with many small businesses struggling to stay afloat, tax refunds will be a lifeline in 2021
That’s why you need to make sure you’re taking advantage of all the tax write-offs available to your startup. Especially since you might be eligible for additional tax write-offs because of COVID.
In this blog post, we’ll look at 9 tax write-offs you need to take advantage of so you can start the year off right.
1. Home office
When COVID forced people to have to work remotely, many had to purchase things such as laptops, desks, desk chairs and more, to create a home office. Well, this means you can deduct expenses for the business use of your home. This includes mortgage interest, utilities, insurance, repairs and depreciation.
Remember, this deduction is only allowed if your home office is used exclusively for business. So, if you rent out the space via Airbnb on the weekends, you won’t qualify for this deduction.
If you’re one of the many small businesses who have struggled month to month to pay rent this year, it’s nice to know that the cost of renting space for your business if fully deductible. This also applies to the utility costs associated with running an office. So, whether you’re renting your own office or renting a small space, take advantage of these tax write-offs.
In addition to the usual marketing expenses (business cards, videos, social media ads, billboards, etc.) this year ushered in new marketing needs. From 6ft apart stickers to banners announcing CDC compliance, anything you used to promote your business and bring in new customers is 100% deductible .
Another common thing for small business owners to do is do business with clients over a meal. If this is you and kept a record of these expense, you can deduct 50% of the costs for business lunches/dinners or even for providing meals for your employees.
If you use your car, a pick up truck or some other form of personal transportation, to go to meetings or run business errands, you can write off the expenses associated. This isn’t as straightforward as some of the other deductions on the list as there are two ways you can claim this deduction.
Use the standard mileage rate – Add up all the miles you drove for your business and multiply by the IRS’s standard deduction rate to figure out your deduction. As of 2020, this standard rate is 5 cents per mil driven for business use.
Deduct your car-related expenses – If you’re a meticulous person who kept a record of how much you spent on gas, repairs, tires, tune-ups, etc., you can add it all up and use it as a tax write-off.
It’s not uncommon for business owners to travel for work. But booking flights and hotels can get pricey, especially if you travel multiple times a year. Luckily for you, if you keep your receipts, you can deduct most travel expenses for both you and your employees if there’s a business purpose behind the trip.
7. Salaries & Employee Benefits
From salaries and wages to bonuses and commissions, what you pay your employees is tax deductible. This includes education assistance, contributions to retirement plans. These deductions also apply to freelancers and contract workers.
If you’ve owned a business for any amount of time, you know that whatever can happen will happen at some point. From roof leaks to toilet breaks, if you had repairs done on your business property, or simply perform regular maintenance to prevent a disaster, you can write off those costs too.
Did you know that you can deduct taxes on your taxes? This doesn’t include federal income taxes, but you can write off up to $10,000 of state and local income taxes, sales taxes, real estate taxes and personal property taxes, and more.
2020 has been a difficult year financially for small businesses. But you can start 2021 off with a financial boost by taking advantage of the tax deductions mentioned in this blog post. This is by no means meant to be an exhaustive list.
Check out a full list of business deductions here. This will take a bit more legwork, but it’ll be worth it when you see Uncle Sam’s check.
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