The end of the year is a hectic time for any business owner, but it can be especially stressful and busy if you are a small business owner. On top of everything else you are trying to manage, the idea of doing tax research might not seem that appealing, but it's something that is well worth your time.
Juggling small business taxes, especially for you and your business as an entrepreneur is something that you should set aside from time for, especially with tax reform looking more and more like something that will come into law in 2018. While tax reform has been the subject of much debate and tweaking, whatever is passed into law will be enforced by the IRS, and claiming ignorance of deductions and credits will not work..
Plenty of articles are written every year focusing on regular small business deductions, but let's take a look at some of the deductions and credits you might not have thought of yet:
1. Take advantage of the Section 179 deduction.
This is a deduction created and passed with the interest of you and other entrepreneurs in mind. For the 2017 tax year, certain property can be expensed in full up to $500,000 limit. If your business has a physical location for conducting business or research, property used for transportation or production of your goods, or you invested in expensive computer software you might be eligible to take this deduction.
2. Don't wait on charitable contributions.
Giving back to charity is its own reward, but it can also come in handy come tax time in the form of a deduction. Donating cash always works, but if you choose to donate appreciable property, like shares of stock, you can claim a deduction for the fair market value instead of the price you had paid.
Be sure to work with your CPA or tax professional to double check your calculations and eligibility.
3. Be careful about deducting meals and travel.
Deducting business travel is not a new topic or idea, but I have seen some entrepreneurs get tripped up when it comes to deducting meals and entertainment. Business travel can, providing you have proper documentation, usually be deducted at 100 percent, while meals and entertainment expenses can only be deducted to 50 percent.
As always, make sure that you have proper documentation for items you are claiming as business deductions.
4. Take advantage of your tax credits.
Deductions get a lot of the limelight come tax time, but there are some tax credits specifically written to benefit your business. For example, the Small Business Health Care Tax Credit allows small business owners to deduct a portion of health care premiums paid if they employee 25 or fewer full time employees.
This credit in particular can save you money or your tax bill, but can also get a little tricky, especially with the current political uncertainty around taxes and health care policy, so be sure to work with your tax expert.
5. Startup expenses can also be deducted.
If you just started your business this tax year you may be able to deduct some of these expenses on your tax return. You can deduct up to $5,000 in qualifying startup costs, and up to $5,000 in organizational costs, but it's important to note that both deductions begin to phase out when your total startup costs exceed $50,000.
Also, if you have more than $55,000 you will have to amortize these costs out over 180 months -- work with your tax professional to review your expenses to make sure they qualify.
6. Don't forget about independent contractors.
If you hired an independent contractor to do some work for you during the year, those expenses are generally tax deducible as a business expense. One thing to remember about this deduction is that you should have sent a form 1099 to the independent contractors that you used during the year.
7. Operational items.
You would be surprised how many entrepreneurs and small business owners forget to deduct costs associated with managing their business. Some of the more commonly overlooked items include:
- Business insurance premiums
- Rent or lease payments related to a business office or equipment
- Any cleaning or other services you paid for your business
The best way to get ahead for next year's taxes is to do some preparation now, and to make sure that you are taking advantage of every deduction and credit owed to you. Taking some time now can save you headaches, and money, this tax season.