The Ultimate Small Business Tax Deductions Checklist

The average small business pays almost 20% of its annual gross income in taxes. Every dollar counts when you’re running a small business, so it’s important to know about all of the deductions you qualify for.

You can save thousands of dollars each year with a small business tax deductions checklist like this.

Keep reading to learn how to lower your tax burden.

Depreciation Deduction

small business tax deductions checklist should include the depreciation deduction. If you buy tangible assets for your business, you can deduct a larger portion of the cost in the year that you made the purchase.

Because of IRS depreciation rules, the cost of purchased assets is spread over several years. Section 179 allows businesses to get larger deductions on asset purchases.

This tax code lets you deduct up to 100% of the cost of tangible assets. These are assets that can be physically touched, such as:

  • Equipment
  • Machinery
  • Furniture
  • Vehicles

This one tax provision can increase your tax deduction and save you thousands of dollars in taxes.

Vehicle Tax Deduction

If you use a vehicle for your business, you can reduce your taxes with the vehicle tax deduction. To claim vehicle deductions, you have two options:

  • Business mileage
  • Actual vehicle expenses

You can deduct each business mile you drove with the IRS business mileage method.

If you choose the actual vehicle expenses method, you can deduct a percentage of specific costs like:

  • Lease payments
  • Insurance
  • Gas
  • Repairs
  • Maintenance
  • Registration fees

Your vehicle might qualify for bonus depreciation if it is over 6,000 pounds. Regardless of the method you use to calculate the tax deduction, you must maintain business records for vehicle use.

Travel Expense Deduction

Travel business expenses are fully tax-deductible. You can deduct expenses for hotels, transportation, flights, and meals.

Every deductible expense should relate to the business purposes of the trip. If you choose to stay in a different city longer for pleasure, you can’t deduct those meals and transportation costs.

A skilled tax advisor can help you plan your business travel days so that you can write off up to 100% of the costs.

Employee Salaries and Contract Labor

You can reduce your tax liability by deducting the dollars you pay to anyone providing services for your business. Employee and independent contractor salaries, for example, qualify as tax deductions.

To benefit from this deduction, you need to properly document and record these expenses. Collect W-4 forms to deduct W-2 wages for employees. For contractors, collect W-9 forms and issue 1099s at the end of the year.

These documents are essential to writing off labor costs. Without the right forms, you’ll miss out on major savings.

Small Business Tax Deductions Checklist: What to Know

This small business tax deductions checklist is only a sample of what you can deduct from your business expenses. A tax practitioner can help you manage business records to ensure you get your rightful deductions during tax season.

At Pacific Tax and Financial Group, we have a team of experts who can provide tax advice and help. For over 35 years, we’ve been servicing the needs of North County.

Contact us today for a tax professional you can trust.