As the owner of a small service business, you might be surprised to learn how many tax deductions you can make at the end of the year. There are numerous deductions available to you as long as you keep accurate records of your expenses and know what to look out for.
Here are some of the most common deductions for service businesses.
Business Expenses Deductions
The most obvious deductions that small businesses can utilize to reduce their taxes are the costs related to running and maintaining a business. This includes any money spent on operating your business, such as office supplies, furniture, equipment rental fees, advertising costs, and travel expenses.
For example, if you operate a consulting business, you can deduct all of your travel costs related to consulting services. This includes flights, hotel stays, meals, and any other related expenses.
The key here is to make sure that all your business-related expenses are documented so that you can prove that they were necessary for running your business. Have your receipts ready at the end of the year to help prove your costs and make sure that you don't miss out on any deductions.
Home Office Deductions
If you run your business from home or have a home office that's used exclusively for work purposes, then you may be eligible for the home office deduction. This allows you to deduct certain expenses related to maintaining and running a home office, such as utilities, internet access fees, repair costs, and depreciation of furniture used in the office space.
It's important to note that this deduction only applies if the space is used exclusively for work-related activities. You can't deduct expenses if you also use the space for personal purposes.
Self-employment Tax Deductions
The IRS also allows self-employed individuals to deduct part of their self-employment tax as an "above the line" deduction, which can result in significant tax savings. This includes Social Security and Medicare taxes that are incurred as a result of running your own business.
In addition to this deduction, self-employed business owners may also be able to deduct health insurance premiums paid for themselves and their family members during the tax year. You need to attach the relevant forms to your tax return to take advantage of this deduction.
As a small service business owner, it pays (literally) to be aware of all the different kinds of deductions available to you at tax time. From business expenses like equipment rental fees and advertising costs to home office deductions and self-employment taxes — there are plenty of ways for small service business owners to save money come tax time.
So make sure you do your research before filing those taxes — it could mean more money in your pocket!
For more information, contact a local company, like Golden Tax Relief.
