Taxes are as old as civilization itself. The earliest tax records we have date back to Ancient Egypt over 4,000 years ago. Taxes have changed quite a bit since then, and several different factors decide how much you pay.
Employment is among the most important factors. Where and how you work and how much you make go a long way toward determining your tax amount. For instance, owning a business works differently than being an employee.
Owning a business can benefit you as much as it can work against you, if not more. We’ll discuss some creative tax deductions for small business owners here.
1. Start-up Costs
Starting a business is an intimidating process, and it doesn’t help that 20% fail within a year. The good news is that the government understands the struggles a new business faces and allows you to write off start-up costs.
When paying taxes, start-up costs are considered capital expenses, which sometimes become depreciation write-offs. Depreciation refers to the loss in value of a given product as you use it. These deductions can be done year by year until you’ve written off the full product.
This makes a lot of sense when you consider that there are several types of taxes in the US, including a corporate tax. Corporate taxes are a type of tax levied on business profits. If you’re going to pay out some of your profits anyway, a little help can’t hurt.
When thinking about tax strategies, you need to consider the specifics of your business. Consider where you work. Do you have a home office or do you go to a brick-and-mortar building to work?
If it’s the latter, you can write off your utility bills, because they’re necessary for businesses to function. Taxes for businesses allow several different write-offs for business necessities.
3. Home Office
While you can’t deduct all of your utilities if you work from home, you can deduct what you use for business purposes. You can even deduct your office if it meets certain standards.
The first standard is that the office must be an office. If you use it as an office, but also for some other purpose, you can’t write it off. You also can’t write off your home office if most of your work is done elsewhere. The office must be your primary workspace.
If you have additional landlines that you use exclusively for work, you can write them off when filing taxes.
Creative Tax Deductions for Small Business Owners
Running a small business is difficult, but saving money on your taxes doesn’t have to be. There are many creative tax deductions for small business owners. We’ve discussed just a few of them here, but you can learn more about taxes by reading our blog.
At Pacific Tax and Financial Group, we’ve made sure to fill our team with experts, so you can be sure to give our clients the best help and advice.
If you’re looking for help with accounting or tax prep for your small business, we can help.