As a small business, you may find yourself paying too much for business taxes. To help lower the amount you’ll need to pay when quarterly taxes come, you’ll need to use existing tax breaks.
Small business tax write-offs aren’t additional income, they will help you use all existing resources.
The IRS offers various tax breaks that many small businesses don’t know about, which is where we come in to help.
Keep reading to find various tax breaks for small businesses to reduce your tax burden.
Home Office Expenses
Depending on your type of business, if you work from home, you can deduct a portion of your home office expenses. Some expenses you can deduct include rent, mortgages, utilities, insurance, and depreciation.
To figure out what part of your home you’ll deduct for taxes, the IRS provides guidelines. There’s the simplified option. You can deduct $5 per square foot to a maximum of 300 square feet.
There’s also the regular method. You calculate this by figuring out what percentage of your home and equipment you use for business versus personal.
Expenses for Traveling
Qualifying small business tax breaks that you can deduct for work-related travel expenses include rentals, dry cleaning, airfare, hotels, and more. To deduct these expenses, you must stay at your destination overnight and for longer than a normal workday.
You must also spend all of your time at your destination engaging in business activities to deduct business travel expenses.
Section 199A Business Income Deduction
If you run a non-corporate business in the following areas, you may be eligible for a 20% deduction:
- S corporation
- Sole proprietorships
Your eligibility will also depend on your income and whether you’re engaged in a business or a service-type trade. If you need help determining your eligibility, check out these services. They’ll help you manage your small business finances.
Contributions to Retirement Plans
The IRS has made it so you can deduct 100% of contributions to your retirement plans from business taxes. Various plans that the IRS approves include:
- Savings Incentive Match Plan (SIMPLE) IRA: put a percentage of funds aside toward your plans
- Keogh plan: tax-deferred plans that use defined-contribution or defined-benefit
- Roth IRA: a plan where you contribute after-tax dollars
- Simplified Employee Pension (SEP) IRA: savings plans for self-employed persons
You can’t put an unlimited amount of money into each plan. SEP IRAs have an annual limit of $61,000 (2022) or up to 25% of your total compensation. You can only use the maximum that’s the lesser of the two.
Meals for Businesses
When entertaining a client, at a conference, or eating while traveling, you can deduct 100% of your beverages and meals. You must get these meals from restaurants. The IRS does not allow you to deduct meals that you buy at your office.
Tax Breaks for Small Businesses
When figuring out tax breaks for small businesses, you have varying options. Most of them are obvious, like expenses for meals and office supplies. Other tax write-offs will require more research, paperwork, or consultation.
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