Small Business Tax Deductions 101: How to Qualify - Growth Freaks

Small Business Tax Deductions 101: How to Qualify

businessman using a calculator

If you’ve decided to open a small business and you’re unsure of whether or not you can take advantage of tax deductions, the answer is yes. Small businesses have their specific tax deductions that you should be aware of. Because we want you to get the help you need to develop your business, we thought we would devise a guide to small business tax deductions that includes some of the most common deductions that you can get and what you need to do in order to qualify for them.

4 Small Business Tax Deductions and How to Qualify for Them

1. Home Office

If you’re running your business from home, then you might just be eligible for a home office tax deduction. What you have to do to calculate how much you can deduct is measure your entire work area and divide it by the number of square feet of your home. The result is the percentage of mortgage, rent, electricity, insurance, and so on that you can deduct. Just keep in mind that the space you measure has to really be dedicated to work. You can’t simply place your laptop in your kitchen and make that whole area tax deductible.

2. Utilities

If you work in an office, then everything that fits in the category of utilities, from power, to water, to telephone bills, and so on, is fully deductible. The only rule is, as in the case of the home office tax deduction, for the utilities to be used for business purposes. For instance, phone lines that don’t only receive business calls, but also personal ones, are not fully deductible. You have to separate the work calls and only deduct those.

3. Entertainment

If you’re thinking you can go to the movies with your colleagues and deduct the cost of the movie tickets, you’d be wrong.

Entertainment tax deductions refer to money that you spend entertaining clients. Click to Tweet
Even so, these costs are not entirely deductible. For example, if you take a prospective client out to eat, you can only deduct 50 percent of the price of the meal. To make sure you qualify for this deduction, the entertainment has to take place in a business setting, or before or after you’ve had a business meeting.

4. Gifts for Clients or Employees

Another really interesting small business tax deduction has to do with offering gifts either to clients or to employees. You’ll be happy to know that as long as you don’t spend more than $25 a year per person, the cost of these gifts are 100 percent deductible. This is great news since you can use these deductions to provide your employees with gifts that show how much you value their work. Moreover, you’ll also be able to send small gifts either to prospective or existing customers, which is an effort they’ll most likely appreciate and remember.

These are just a couple of small business tax deductions from a rather extensive list, but they’re definitely some of the most important, useful, and interesting ones. If you qualify for them, it would be a pity not to take advantage of their benefits.

Image Source: here.

Author: Amanda Knowles