10 Tax Deductions for Small Biz Owners

Ten tax tips for small business ownersGuys, it's tax season. This can be a really intimidating time of year for small business owners and those who are self employed. Taxes can be confusing, not to mention expensive. As our company has grown over the years I've learned a lot about keeping track of our books. We also receive lots of help and advice from our accountant (and friend), Jason, who helped compile information for this post with me. If you're getting ready to do your taxes here are 10 tax deductions you ought to consider.

1. Vehicle Use. Do you use your car for work purposes? Did you know you can deduct the business use of your vehicle? There are two methods for calculating the use of your vehicle, you can learn more about it here. In our opinion the simplest solution is to keep a log of your work related mileage (either with excel or an app). Also save any receipts from tolls or parking fees, but file them as an expense (business travel expenses can be deducted as well).

2. Office Use. Do you rent a space that you use as an office or studio? If you have a designated home office space you may be able to write off a portion of your mortgage or rent. There are a few rules about deducting the use of a home office, namely that you must use it regularly. You can read more about this option here

3. Business/Office Supplies. Chances are you bought all sort of things last year that you needed in order to conduct business. This might include the following: a computer, a camera, a printer, printer supplies, pens and pencils, software, postage, apps, online fees for web hosting or blog platform fees. It is best to keep a record of these expenses throughout the year, saving receipts in an organized fashion in case you ever get audited. This may seem like a pain at first but it's worth it, trust me. Also, more expensive items that you will use over the course of several years (like a computer or digital camera) will need to be depreciated over several years. A tax pro can help you with this step, just save those receipts!Top ten tax write offs for small business owners4. Education. It costs money to get an education, and the IRS allows some tax deductions in this area. You'll need a record of your tuition, fees or student loans. Read more about educational tax deductions here

5. Insurance. If you are self employed chances are you pay your own health care premiums. These are tax deductible. If you own a small business and have any kind of business insurance, these premiums may be deductible as well as renter's insurance for a rented office space or car insurance on a company car. 

6. Advertising and Promotions. Do you have costs associated with advertising your business or product? Do you send out mailers? Do you utilize an email marketing service? These costs can be tax deductible so long as it does promote your business, and you have some documentation of the transactions.

7. Banking fees. This one's often easily overlooked. If you pay lots of fees associated with your bank or Paypal. Keep track of them, as they can be deducted.

8. Retirement Plans. If you are an employer most of the time you can deduct employer contributions on behalf of an employee. If you are self employed (the recipient/employee) then this can become more complicated as there are more rules regarding if you can deduct funds to a retirement account. Check with your tax pro for more information.

9. Tax Preparation. Ok, full disclosure, I'm peppering this one with my personal opinion. If you are a small business owner or self employed I HIGHLY recommend getting your taxes done by a tax professional you use over the course of many years. Yes, you can deduct the fees associated with this service the following year (for personal taxes there is a limit to the amount you can deduct). But even more important than this I've found that having a second person with more knowledge and experience take a look at your receipts/books is the number one thing you can do to save money during tax season.

10. Moving Costs. This won't apply to everyone, only those who move for work related reasons. And there are limitations. Be sure you know what address is your tax home. You must move at least 50 miles. You must be there (the new, moved-to area) for at least 39 weeks during the first year of employment (or 78 weeks during the first two years if self employed). 

If you've got your own venture that's spending and making money, it's never too early to start thinking about taxes. Create habits. Save receipts. Always try to learn more about the system. It will be so beneficial in the longrun. And don't be discouraged if you didn't do everything absolutely perfect last year. Being a good small business owner is a learning process. We are always learning new and better ways to do business every single year. You can do it! xo. Emma

Credits // Author: Emma Chapman, Photography: Elsie Larson. This post was written with considerable assistance from our accountant Jason Jordan. Resources linked throughout.

  • Thank you so much for compiling these! I knew a lot of them but was unsure about a few. How early do you guys start doing your taxes? I’m a small one-woman operation at the moment so it will probably take less time but just curious…

  • Thanks so much for sharing, the one thing that always keeps me from wanting to start a for real business is the money and taxes part of it. Not something they ever teach us in school. Taxes honestly scare me because I think I have to do everything super perfectly all at once. I love how you said it is a learning process that you just have to keep working at. Great post πŸ™‚

  • I was just trying to look into this myself and getting completely lost! Thanks so much for sharing these awesome tips!

  • I’m gonna have to bookmark this page. I plan on opening my business this year and hadn’t thought of many of these

  • Wow thank you so much! I am just wrapping up my first year as a freelancer and tax season is so daunting. These tips are a great overview and super helpful.

    Have a wonderful weekend!

    XxMO
    madame-ostrich.com

  • as an auditor for a public cpa firm, it makes me super happy to see that you guys take this so seriously! also, great advice!!

  • We actually do our taxes quarterly. We’ve already turned in our Q4 books to our accountant, I usually try to do this the first week of the new quarter. You have a few months before the deadline but it’s always good to start as early as you can because chances are there will be additional information you may have missed and will need to track down. Or, at least I usually have something I’ve forgotten. πŸ™‚
    -Emma

  • These are great tips! Something I’ll definitely refer back to in the future! πŸ™‚

  • This is such a great post! Thanks for compiling all this info. πŸ™‚

  • I’m just starting to learn about taxes right now (I’m 20), and now I understand why people hate them so much… there are so many things to watch for, but most importantly, to keep all receipts! Great tips for my future tax work!

    M.

  • I’m so glad you shared these tips! My parents have owned a medical practice for the past 20 years, and as I’ve gotten groomed for management, I cannot begin to say how important #s 3, 4, 8 and 9 have been for us — especially 9. Our accountant is semi-retired and we are his only client now, but his expertise has been so valuable, particularly since his specialty was medical business management.

  • Thank you for posting this list! Sometimes I forget about all the things that go into my business. I am going full-time for myself next week and I am nervous yet bursting with excitement! I cannot wait to see what comes and I thank you for being a great inspiration for me in every aspect of life and business!
    http://www.agirlnamedkatie.com

  • Awesome article! I’d love to read about your adventure creating a new business (moving from a hobby to a real business) and all the steps involved!

  • I’d suggest a Google Docs spreadsheet that you can drop numbers into under some of these “spending” categories. Keep an envelope for those receipts, too. Just write a quick category note on each receipt. If you’re super organized, use an app to get all your receipts categorized into dropbox. I’d like to imagine myself doing that (and even have the app), but I know better.

  • Quarterly is the fantastic method. A much better alternative than trying to sort and make sense of whole year of receipts and expenses. I’m looking into getting an appointment with a CPA to get some advice for filing since an accountant isn’t in the budget quite yet. I’ll definitely be implementing this method in the future. Thanks lovely lady! πŸ™‚

  • Very handy advice, as creatives we still have to plough through this stuff.

    Working out tax is just as much of a headache over here in the UK.

    I use an online accounting service called Freeagent and it is just great.

    It has saved me hours, if not days of time sorting out painful invoices, expenses and tax stuff.

  • Wonderful post!! I am an accountant for a private equity firm & also keep my dad’s books for his small business on the side. Tax laws are tricky & some change year-to-year. I completely agree about the importance of having someone trained specifically in the area of tax accounting to prepare your returns, because there really are so many things that can be overlooked without proper knowledge & can really save you big-time…not just on money, but time, too!

  • I like this idea, too πŸ™‚ Emma & Elise are fantastic business women at the core of it all. It would be interesting to read about their process.

  • Thank you SO MUCH for this post. So nice of your accountant to help out with it too. I wish more resources with simple lists + consolidated information were out there. It’s so easy to get lost in the sea of information. You guys are incredible : )

  • Oh, bless you! Taxes are my least favorite part of for my small costuming business (I would seriously rather wash forty yards of fabric than file my quarterly sales tax), and I was wondering about whether our renting a two-bedroom apartment and using the extra room as my studio could count as a home office deduction. Sounds promising!

    I wish I had saved all of my receipts from this past year, but I’m very bad at keeping and storing them. I think in this coming year, I’m going to try to only use my Paypal debit card for business– it sends me digital receipts AND lets me download PDFs of my use, so I don’t have to stuff receipts into my physical file folder. πŸ™‚

  • Thank you for this post! I am currently working on my taxes for my small boozy jam business, and I never thought about adding my health insurance to the mix. Love, love, love, your blog.

  • I don’t do business at all, maybe a handful times a year, but it’s so good to know a great accountant personally so help you out! πŸ˜‰

  • I totally agree about using a professional to do your taxes. They will find additional write-offs that you never thought of. I do all the grunt work and provide a summary of all income and expenses and provide that to my CPA. This allows him to create the tax return without spending time rummaging thru a box of receipts. This makes it less costly for me, and easier for him.

  • Thanks for this!

    Do you think you could do a post on tax deductions for specifically bloggers?

    I can’t seem to find too much information on what can be claimed as a deduction and what can’t. Obviously all the big ticket items like office/home office, phone, website etc but what about materials, travel, coffee with clients etc. that all go towards running your blog?

    Mademoiselle C. xx
    http://www.creamstop.com

  • Hugely helpful! My first year of doing own accounts and the quarterly taxes idea is brilliant, rather than rushing around in a panic in January (like I;ve just been doing!).

    Only just discovered your website this month and already really enjoying it.

    Thanks!

  • Really great tips here. I use a program called Wave (www.waveapps.com) which syncs to your business checking and paypal accounts. You can then go in and tag debits and credits into the correct categories. Makes it super easy to track your income and expenses as you go throughout the year too. Don’t leave it to the end of the year to find out whether you’re turning a profit or not!

  • Those were some really great tips. But I would like to add to the post by saying that filing taxes by yourself may not always be a good idea. Whether your business is small or large, hiring an tax accountant is always a good idea. Although it may seem like an additional expense, but hiring an accountant will help you save in the long run.

  • Ooo thank you for this post! I was just in a bit of a tizz about doing my taxes and this helped me calm down and see it in a slightly more positive light πŸ™‚

  • It is a great time of year to give to a local charity in your community. Not
    only help with Tax deductions it also can help improve your companies brand
    and of course the needy people in our areas. Thanks!