Whoever said running a small business is easy? All the technology in the world won’t guarantee a bakery financial success will it? Of course as a small business, you will be entitled to a wealth of small business tax credits.
You should know that small business tax credits are going to be different (but related) than what we’d call simply a "business deduction". You don’t have to own a business to get business tax deductions on business related travel and things of that nature, but you do have to own a business to itemize and deduct office expenses.
Having clarified this, let’s continue on with small business tax credits. Lets jump right into a list of some of the most common small business tax credits:
When visiting clients, customers, business related meetings, and if you run your business from a home office then driving to a supplier from this home is a 100% deductible expense. Concerning vehicles, you will have to choose between the standard mileage rate or the actual expense deduction
If you had loaned money to a supplier, employee, or a customer and they never paid you back then it’s possible that there’s tax deduction in it for you. This is only concerning real contracted debts where there was legal precedent for repayment. You must have also tried to collect the debt and/or must prove that it is uncollectible. You must have also sustained a loss because of the lack of repayment.
This one is all about various business assets that will be in use longer than one year. It must be used directly in the process of procuring income, it must eventually decay or lose value over time, and it can also certain property or land.
Employee compensation that is tax deductible includes: salaries, awards, bonuses, fringe benefits, group term life insurance, adoption assistance, educational assistance, discounts on goods or services, flights on airplanes, meals and lodging, membership in country clubs, tickets to entertainment or sporting events, and the use of a car.
Home Office Deductions
Having a home office means that there is an area of your home that is exclusively used for business purposes on an ongoing basis. Using a hobby room from time to time will not grant you the status of home office. The most important functions of your business must not be carried out anywhere else. The home office deduction like depreciation, is a complicated area of income taxes and you should fully educate yourself in all the ways you can if you plan on trying to use it.
If your business has ordinary and necessary insurance expenses (like a ski resort might) then you may be able to deduct some of those. Valid cases of deductible insurance expenses include: coverage for losses on unpaid debt, casualty and theft insurance, professional liability or malpractice insurance, accident or health insurance, overhead insurance, overhead insurance, coverage used for business vehicles, and then there are some types of insurance that you actually can not deduct.
Apparently you can deduct all of the interest you pay for debts that you incurred through your business, and if you just started a business and you’re using a credit card for start up expenses then interest costs in that realm are also tax deductible.
Legal and Professional Fees
Any fees you pay for services like attorneys and accountants are also tax deductible.
Any expenses you pay while making payments for yourself and employees under a Simplified Pension Plan are tax deductible.
If you pay rent for a property where a significant portion of your business activity is happening, then you may be able to deduct those expenses. This is subject is every bit as tricky as the home office deduction, do your homework.
Wait a second, taxes are tax deductible? Yup. If your state taxes your gross income then you can deduct that on your federal return. Have personal property taxes being collected by the state or the feds? You can deduct it. Real estate, sales, and excise taxes as well!
Travel, Meals, and Entertainment
Your business obligations must be completely necessary in order for the travel to be business deductible. Meals will obviously fall within those required travels, and receipts are absolutely necessary. If you host a client at a social, athletic, or sporting club then your expenses will be tax deductible. As will expenses used for hosting a client at a theatre, on a yacht trip, hunting or even fishing.
There are many expenses that won’t qualify as a small business expense, so the responsibility is on you to pursue the details you need in order to establish any degree of legal certainty.
If you were using TurboTax’s online tax software to file your return, then they would be asking you questions about these very situations in order to determine your eligibility for tax programs like these and guiding you right through the entire process. Over a million businesses filed with TurboTax last year, as their "biggest refund guaranteed" slogan is truly not misleading.