Common Tax Deductions That Small Businesses Might Miss

By DeBlanc + Murphy
February 20, 2023

As a seasoned small business owner with years of tax-filing experience, you might think you’ve dotted all the I’s and crossed all the T’s. But many entrepreneurs are surprised to discover they’ve been overlooking common tax deductions that will save them money and ease the burden of tax season. But first, let’s define tax deductions.

What are Tax Deductions?

Tax deductions (or write-offs) are a term the IRS uses to describe any expenses you can subtract from your income. Tax filers use write-offs to reduce the amount of income that is taxable and thus lower their bill. For expenses to be designated as a “tax write-off,” they must be considered necessary for fulfilling business operations.

We’ve listed some of the most common tax deductions that small businesses might miss.

Initial Business Expenses

Before you even opened the doors to your small business, you probably incurred substantial expenses conducting market research, testing your product, finding a storefront or office space, advertising your launch, and more. These expenses are generally deductible so long as they fall into the following categories:

1. Customer surveys

2. Market and produce research

3. Business site selection costs

4. Marketing costs

5. Training wages and consultant fees

6. Acquisition fees (if you bought another business)

7. Lease

8. Equipment

Remember that you can deduct up to $5,000 on your first year’s return.

State & Local Taxes

Chances are you pay state and local tax. If so, your business may be able to write off these expenses on your federal tax return.

Interest & Fees

Do you use credit cards to pay for business expenses? And have you paid interest or fees on these credit cards? You can write both of these expenses off.

Salary and Payroll Tax Deductions

Many small business owners are unaware that they can avoid paying self-employment tax by giving themselves a salary instead of distributions of dividends. This allows you to transfer the payroll tax deduction from yourself to your business.

Retirement Contributions

Contributing to a retirement plan such as an IRA or 401(k) is wise for several reasons. First, it provides long-term financial security for your retirement. Second, it can reduce your tax burden. By contributing to a retirement program, you’ll receive a tax deduction and increase your long-term savings. However, remember that tax benefits vary depending on your chosen retirement plan.

Deducting Uncollectible Debt

Uncollectable debt, or “bad debt,” happens when you sell your products or services to clients or loan money to a supplier, but you are never compensated for those goods or services. In such instances, the IRS allows small business owners to claim the bad debt if the amount owed was included in their gross income or was loaned out in cash.

Need Help Finding Additional Tax Deductions?

These are just a handful of the many deductions that small business owners frequently miss out on. If you’re looking for more help, contact the friendly and experienced team at DeBlanc and Murphy! We can help maximize your tax deductions.

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