One aspect common among all small businesses is their desire to slash their income tax bills by claiming deductions. However, most of them are unaware of the tax deductions relevant to their industry. Those who have a fair bit of knowledge in accounting and taxation dread the activity of perusing all receipts to check if they can claim any.
Moreover, the process is quite confusing. Out of scepticism, many even deduct less than they deserve.
To help them all, we have put together a list of top tax deductions every small business owner must know about. So, if you are reading this blog post, continue doing so. If necessary, hire an accountant to claim most of them and learn how to apply them to your small business.
Top 8 Tax Deductions Applicable to Your Small Business
1. Work-related travel expenses
Does your business involve a lot of travelling? You can then claim deductions for expenses on hotel booking, car rentals, meals, airfare, and others. The only thing necessary for that is correct documentation. Also, the company owner must travel away from the base location to other cities for at least a day to be eligible for a tax deduction.
2. Office Supplies
Running an office requires stationery items like pens, papers, desktops and other supplies. If you use them within the same tax year in which they were purchased, you can always include the associated expenses in tax deductions. Don’t forget to retain the receipt when buying these office supplies!
3. Business meals
Most of you may not be aware, but 50% of food and drink expenses are deductible. Qualifying for it requires all to retain documents stating the date and location of meals, aggregate meal expenses and the business relationship you share with people you have dined with. The next time you go out for corporate lunch, tuck those bills into your pocket and mention the details of the meal.
4. Business Insurance
This is one of the most common tax deductions that small business owners skip. Therefore, commit this to your memory to claim tax deductions of insurance costs next time onwards. The renter’s insurance is also another expense for which you can easily claim tax deductions. All that is required of you is to keep track of the square footage you are dedicating at your home office for business work and apply for tax deductions.
Depreciation of assets like cars and machinery are again deductible. To come across the depreciation sum, check how much is total asset cost coming over the useful lifetime of that very asset.
6. Phone and Internet expenses
Ever since digitalisation has been on the rise, internet expenses have gone up. Apart from this, business owners also have to bear the phone bills. The good news is that you can always claim these expenses on your tax forms by keeping a tab on time spent on them for business purposes.
7. Medical expenses
Do you have health insurance? Go ahead and claim its premiums apart from the miscellaneous medical care expenses like the cost involved in paying doctor fees, prescriptions, drugs, etc. Documenting these medical expenses can help small business owners avail themselves of tax deductions.
8. Salaries and benefits
All small business owners who employ several workers can deduct the wages and benefits enjoyed by them for tax returns. However, it’s not applicable if that employee is a sole proprietor or partner in the business.
Bring about a significant difference to your bottom line by lowering the aggregate taxable income by claiming all deductions associated with your work. Speed up the process by hiring a professional skilled in accounting and taxation to guide you through the income tax filing process and reduce your entitlements to the Government as taxes.