Business Expenses You Weren’t Aware You Could Claim For
When it comes to owning and operating a small business, there are certain advantages to filing as an LLC, Limited Liability Company. One of the greatest of all perks is the fact that there are quite a number of tax benefits which many owners aren’t even aware they can claim for. Next year, when tax season rolls around, you will want to have all your paperwork and documentation in order so that you can qualify for tax credits and deductions, many of which you may not even know you should have claimed this year. What business wants to pay more tax? If you have paid on any of the following items, you have literally overtaxed yourself!
It All Begins with Startup Costs
There is good news here and not-so-good news here. If you claim your startup costs after your first year in operation, you can claim everything you qualify for. However, if you failed to claim after that first year, you will be able to amortize those costs not deducted over a period extending up to 180 months. What you need to be aware of is that the Internal Revenue Service, IRS, states that startup costs must be expenses paid for literally before the day you launched. Those costs can include such things as:
- Business advertising
- Market analysis
- Salaries for employees in training
Other things which can be written off would include money paid for professional services and consultants. If you are unsure which of these deductions you qualify for, it is always helpful to let a Certified Public Accountant do your taxes. Believe it or not, the fee you pay your CPA may qualify for a deduction as well.
Tax Credits You May Not Be Aware You Can Take
While not a write-off or deduction, tax credits can help reduce the amount you owe Uncle Sam when running an LLC. A tax credit can be awarded for things like money paid into social security, Medicare, and credits for childcare provided by the employer. Also, the IRS will give general business tax credits for utilizing motor vehicles that use alternative power sources such as renewable fuel. The difference between a write-off and a credit is that the write off is subtracted from taxable income while a credit is subtracted from the total tax due the IRS. It’s interesting how that works and since both help to reduce the tax you pay, both serve the same purpose albeit through different routes.
Business Insurance If Solely for Business Purposes
If you can substantiate that the type of insurance coverage you pay for is specifically for the business, you are probably entitled to claim it. For example, if you run a cleaning firm, you can easily find cleaning business insurance online, which can be claimed as an expense. The same is true for handyman insurance, landscaping insurance, plumber’s insurance, and the list goes on. This can be a real boon for any small business looking for a break wherever possible. The only way to increase profitability is to reduce the amount of debt, and tax debt can be huge so why not take advantage of this type of write off? The types of insurance you can claim would include:
- Employer liability
- Professional liability
- Motor vehicle insurance
- Coverage for buildings and contents
- Equipment coverage
- Business interruption
- Keyman insurance
- General contractor’s insurance (as mentioned above)
There, indeed, might be other types of insurance you pay for which may qualify for a deduction, so it is important to consult with a CPA when it comes time to file in the spring.
Travel and Transportation
As a tax deduction and not a credit, the amount of money you spend on travel and transportation could be claimed. These expenses might include costs associated with travel when on the road visiting clients or customers or traveling to a place where a business meeting will be held off-site. It is possible to claim the cost of train, bus, and airplane tickets, and if you are traveling by car, mileage counts as well. Also filed under travel and transportation are certain expenses classified as entertainment during travel for work-related reasons. Again, these are deductions and not write-offs.
Property and Location Expenses
These would be classified as write-offs and not deductions because you are claiming against a pre-tax figure. Home-based businesses and home offices are included in these write-offs as well as rent paid for use at the home. It should be noted that mortgages and utilities can usually not be used, but there is no reason why you can’t claim part of the amount of rent in the home if they are solely delegated for business purposes.
Again, what business couldn’t use a break when it comes to doling out money to Uncle Sam? Many small businesses are already operating with limited profits and this is especially true of those businesses just starting out. If you weren’t aware of the fact that you can claim for many of these types of expenses, now is the time to start thinking ahead. Next year will be here quicker than you think, and a smaller amount to the IRS will be a welcome benefit after struggling so hard to make a profit. Maybe this is the year!