words Alexa Wang
Paying taxes is a process that makes everyone shiver, significantly if affected directly. Whether you are employed, an independent contractor, or running a business, you must commit your dues to the taxman as required by law.
The process is complicated, starting from getting the income, deducting expenses, filing returns, and paying the taxes. But if done precisely, it can be an easy process. Nothing relieves you from having deductions on your tax bill. Fortunately, there are several tax deductions that you can deduct and help your business stay afloat. Here is the list.
Qualified Business Income
This bill came recently, and it allows small business people to deduct at least 20% of their income on taxes. Regardless of your business formation, either a sole proprietorship, limited company, corporation or partnership, you are entitled to this tax deduction. What does it mean? This tax means if you get an income of $1000, then 20% of this, which is $200, can be deducted before tax rates get implied. However, don’t get excited yet as this tax affects only certain types of businesses and not all. The deduction has a limit to consultants, lawyers, doctors, and other related enterprises. Also, it covers certain limits of income. When exceeded, you have to pay the regular taxes.
Office Expenses and Supplies
Do you use cartridges, printers, ink, pens, and other stationeries in your business? Then the expenses qualify to be deducted from your taxes. Regardless of the company you are running, anything supplied to the office and used to run the business must get subtracted when filing taxes as long as it’s a business consumable. How do you keep such expenses? You can use the 1099 expense tracker, which keeps records of every business expense, and later gets deducted from the tax bill. Other deductibles that apply to this bracket include smartphones, software, or laptop purchases used to run the business.
Home Office Deductions
Are you running your business from home? Have you set aside space in your house that acts as your business space? Well, you qualify for this tax deduction. As long as the area is a fraction of the whole house and used only to carry business processes, you can deduct this space on its current value. Other things you need to subtract from this space include its insurance, mortgage, if any, repair, utilities, and depreciation. This deduction enables business people to deduct at least 5% for every office square when remitting their taxes. If your home office acts as something else when the business is not running, you should forget about this deduction because it won’t apply.
Advertising and Marketing
Advertising and marketing is a business cost which must be deducted when you file for your returns or paying your tax bill. The good thing about advertising and marketing is that it helps bring in money to the business while reducing the tax bill. Anything you use in promoting your business, including the business cards, lunch for your clients, print and picture advertising, social media advertising, and promotions, needs to be deducted from the tax bill as long as you have proof.
Do you have a car that helps in running your business? Then it’s eligible for a tax deduction, and here is how: When you use your vehicle to run business errands such as carrying cargo to clients, bringing in stocks, getting customers to and from the business site, and many other uses, you deduct these expenses in your tax bill. There are two types of deduction you can choose from. One of the methods is by using the standard mileage rate. This mileage rate is where you record every mileage used to carry out the business processes and multiply it with the tax rate. The second option is by recording all the expenses incurred by the vehicle when carrying out business activities. Such costs include car registration, insurance, gas, repairs, tires, and other vehicle expenses. You have to document all receipts involved in this process.
How many times do you travel for business? If you are the business owner, you and the employee can deduct the expenses you used to travel for business either by air, sea, and road. All you need to do is keep the travel record, the receipts, and the kind of trade you conducted. After the tax period, you can deduct these and enjoy the tax relief.
There are so many tax deductions that you can use to reduce your tax bill. The list in this article only represents a few that you can count on. To be on the safe side, get software that tracks all these expenses to avoid inconveniences and loss of receipts.