Seven Last-minute Small Business Tax Deductions

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Business
Mar 16, 2020
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Updated 
10:30 am
 
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There are some things that never change in Philadelphia — like the city’s love of sports, cheesesteaks and pretzels. Unfortunately, there’s another thing that doesn’t change: the need to file your taxes. Here are seven deductions that could help you shave your 2019 small business tax bill:

1. Home office

This is a commonly overlooked but potentially valuable deduction for anyone who runs a small business from home. If you use a portion of your home regularly and exclusively for business — like a spare bedroom or basement, for example — you can probably claim the home office deduction. Note that this area of your home must be used regularly and exclusively for business purposes, to meet with clients or for storage of inventory or samples.

There are two ways to calculate the amount of your home office deduction. The actual expense method is more complicated and involves dividing the total expenses of operating your home between business and personal use. With the simplified method, you’ll multiply the total square footage of your home office area (up to 300 square feet) by $5 for a maximum home office deduction of $1,500.

2. Vehicle expenses

You can take a deduction for the business use of your car or truck. There are two ways to claim the deduction: Add up the actual expenses you incurred in operating the vehicle throughout the year — such as maintenance, gas, parking and tolls — or claim the IRS standard mileage rate of 58 cents per mile for tax year 2019. Run the numbers to see which method yields a higher deduction.

3. Business meals

You can deduct some of the cost of taking clients out to eat if you discuss business during your time together. More specifically, 50% of the cost of business meals is deductible. In addition, you can deduct 50% of the cost of providing meals and snacks to employees and 100% of the cost of throwing company parties and holding retreats. Be sure to save receipts documenting these expenses.

4. Depreciation on business assets

The assets you use in your business, such as computers and equipment, are depreciated over a certain number of years that’s based on their estimated useful life. However, some assets can be depreciated in full during the year they are placed in service. This is known as bonus depreciation.

Tax reform doubled bonus depreciation from 50% to 100% and also extended bonus depreciation to used property in certain situations. To qualify for bonus depreciation, assets must be used in your business during the year of purchase and have a useful life of longer than one year. They also must wear out, get used up or lose their value over time.

5. Salaries, wages and benefits

If you have full-time or part-time employees on your staff, you can deduct the salaries, wages, commissions and bonuses you pay them. To be deductible, these payments must be reasonable, ordinary and necessary; made for services that were actually provided; and paid or incurred in the current tax year.

Similarly, you can deduct the cost of employee benefits you provide like health and life insurance, education assistance, and retirement plan contributions. You can also deduct payments you make to freelancers and independent contractors you hire throughout the year.

6. Professional services

If you use the services of an accountant, attorney, consultant or other outside professional, you can deduct the cost of these services on your tax return. The fees must be considered reasonable and necessary in order to be deductible.

7. Business travel

If you travel for business purposes — for example, to attend an industry trade show or visit with an out-of-state client — you can deduct the costs associated with the trip. Deductible business travel expenses include airfare, lodging, meals, taxis or rideshare services, automobile expenses, tolls, parking and tips. Keep receipts to document all deductible business travel expenses.

Be sure to speak with your tax advisor for detailed guidance when it comes to your particular tax situation.

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