Running a business can be expensive. Everything comes at a cost, from keeping the lights on to buying inventory. Luckily, you may be able to deduct several business expenses to reduce your taxes. Even super small businesses with no or few employees can benefit from these deductions.
11 types of deductions
Below are 11 common business deductions you might be able to claim, even if you are a sole proprietor or own an extremely small business.
If you plan to claim deductions, you must have proof that you actually deserve those deductions. That’s why it’s important to know how to prepare for an audit. If the IRS ever questions you, you must be able to show records of your expenses. Save your receipts and show your math.
1. Rent expenses
If you rent the property where you conduct your business, you might be able to deduct the rent expense from your business taxes.
If you have a home office and you rent the place where you live, you might also be able to deduct your rent payments. However, you can only deduct the percentage that applies to your home office. Also, if your home office is part of another living space, you probably can’t use this deduction. For example, if your desk is in your bedroom, you may not be able to use the rent expense deduction.
2. Utilities
You can deduct the utilities needed to run your business, such as water, electricity, gas, phone, and trash.
If you run your business from home, you may be able to deduct a portion of your utility bills. For example, you can deduct a portion of your electric bill that corresponds to the percentage of space your home office takes up. Or, if you use a cell phone for both business and personal use, you can deduct the business use of your phone.
3. Repairs
You might need to make occasional repairs to your office space to keep your business operational. The cost of repairs is deductible.
Home-based businesses can also deduct repairs. However, you can only deduct home repairs made in your home office.
4. Office supplies
Any office supplies you use for your business may be deductible. For example, you may be able to deduct the cost of pens, paper, ink cartridges, staples, desks, bookcases, and more.
5. Office equipment
You might need to buy a new computer, copier, fax machine, or other type of office equipment for your business. All these items are deductible.
Because office equipment can be expensive, you might not be allowed to deduct the entire cost in one year. You might need to know how to find depreciation expense.
6. Taxes
Some federal and state taxes may be deductible from your business taxes. For example, you may be able to deduct employer and real estate taxes. You might also be able to deduct licenses and regulatory fees.
7. Insurance
You might be able to deduct your insurance premiums. For example, you can deduct liability and workers’ compensation premiums.
8. Software
Boxed, downloadable, and online subscription software may be deductible if you use it for business purposes. For example, your online accounting and payroll software subscriptions may be deductible.
9. Advertising
You can deduct many common advertising and promotion expenses, such as business cards, phonebook ads, website costs, internet advertising, and more.
10. Consulting fees
At some point, you probably need help from an accountant, lawyer, or other professional. The consulting fees you pay to these professionals may be deductible.
11. Education and training
If you pursue any education or training to maintain or improve your skills, it might be tax deductible. You might be able to deduct trade shows, conferences, books, DVDs, etc. You cannot deduct education that is unrelated to your business.
As part of education, you may be able to deduct your subscriptions to magazines, newspapers, and trade journals. Of course, these should be related to your business.