Take Advantage of Commonly Missed Tax Deductions

Every dollar counts when you’re a small business owner. Every tax break you claim can make a big difference in your bottom line, helping you improve your cash flow and allowing you to reinvest in your operations.

While you may already be making major deductions on your tax filings, there’s a good chance you’re missing out on some lesser-known tax breaks. Many new entrepreneurs miss certain deductions simply because they’re unaware of them or unsure if they qualify.

These small yet impactful deductions can add up over time, potentially saving you hundreds or thousands of dollars annually. Failing to claim these tax breaks is like leaving money on the table, money you could use to grow your business further.

So, to help you maximize your savings, we’ve listed the tax deductions small business owners commonly miss and how you can take advantage of them.

Seven Tax Deductions Small Business Owners Commonly Miss

Major expenses like rent and equipment aren’t the only things you can deduct from your taxes. There are plenty of other smaller items you can claim to reduce your tax liabilities, including:

Business Meals

Many entrepreneurs overlook vital tax deductions for business meals. The IRS allows small business owners to write off 50% of their business-related meal expenses.

We suggest you keep detailed records of your working lunches to maximize this tax break. Write down the meal’s date, location, attendees, and purpose. Also, keep all your receipts to ensure proper documentation in case of an audit.

Remember, only meals related to business discussions qualify for this write-off.

Home Office

If you use a portion of your home for your business operations, you can claim a home office deduction. This write-off allows you to deduct a portion of your mortgage, utilities, and maintenance costs from your taxes.

The IRS says there are two ways to calculate your home office deductions: the simplified and the regular method. The simplified method uses a flat rate for each square foot you use for your business, whereas the regular method uses your actual expenses.

Internet & Phone Bills

Business-related internet and phone expenses are also tax-deductible. If you use your personal phone to call clients or suppliers, you can deduct a percentage of your bill from your business’s taxes. Just make sure to claim only the portion that directly applies to your business.

The same rule applies to your internet bill. Calculate how much your internet usage is dedicated to business use and write off that amount accordingly.

Car Mileage

If you use your car for business-related travel, the car mileage you incur during these trips can be deducted from your taxes.

Like the home office deduction, there are two ways to calculate your car mileage. You can use the standard method, where you multiply your business-related miles by 67 cents, or the actual expenses method, where you calculate your total car costs and multiply it by your business-related miles.

In addition to car mileage, you can claim some toll and parking fees as deductibles if they are from a business trip.

Continuing Education

Continuing education is another deduction that not many small business owners know about. Any training or education programs that enhance your business or skills can be written off so long as they meet the following criteria:

• They help maintain or improve skills needed in your current work.
• They are mandated by law or employers to retain your present salary, status, or job.

Any program that qualifies you for a new trade is not deductible, even if it meets the criteria above.

Self-Employment Taxes

Another major tax deduction you mustn’t miss is the self-employment tax deduction. Since employment taxes are typically split between the employee and the employer, you can write off the employer portion from your business’s tax bill.

Startup Costs

Forming a business entity like a limited liability company (LLC) can be expensive, but the good news is you can use your startup costs to offset your taxes. This includes:

• Legal and professional fees.
• Market research and advertising expenses.
• Training and education expenses.
• Business licenses and permit fees.  

According to the IRS guidelines, LLCs can deduct these expenses so long as:

• It’s a cost you paid or incurred to operate an existing business in the same field as the business entered into.
• It’s a cost you paid for or incurred before your business began.

Do You Need An LLC to Write Off Business Expenses?

No, you don’t need an LLC to write off some of the mentioned business expenses. However, it would certainly help you increase your tax savings.

LLCs are entitled to more deductions and credits than other business entities. More importantly, LLCs do not have income taxes.

Since LLCs are considered pass-through entities, everything they earn is passed through to their owners, who report their share of these amounts on their personal income tax returns. The owners or LLC members are then taxed based on their tax rates.

Having this tax status alone will save hundreds of dollars in one year. Combine this with your other tax deductibles; you’ll be able to keep more of your hard-earned profits.

So, although having a long list of deductibles to claim can help reduce your taxes, structuring your business as an LLC will amplify your savings further.

Improve Your Bottom Line Today

As a small business owner, missing out on tax deductions can cost a lot. Any savings you make can be used to fuel your business’s growth. That said, you should take full advantage of applicable tax breaks and use LLCs’ pass-through taxation to enhance your tax-saving potential.

Improve your bottom line today and let NCH help you form your own LLC!

NCH specializes in LLC formation in Nevada. Our team of business formation specialists will guide you through establishing your LLC and ensure that it is set up for maximum tax savings.

Don’t let the burden of taxes stop your business from reaching its potential; incorporate today! To learn more about our formation services, visit our website here or call us at 1-800-508-1729 to schedule a free consultation.

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.