9 Deductions Business Owners Forget to Claim on Their Taxes

Operating a small business is a challenging but thrilling endeavor, with many businesses barely staying afloat. In such a tight budgetary environment, where every dollar is pivotal, mastering small business taxes is essential. There are many deductions exclusive to businesses that can help lessen your income tax burden. If you neglect claiming these benefits you're leaving money on the table.

The U.S. tax system's complexity often leads to many small business owners paying more than they have to in taxes. However, the larger, more resource-rich corporations end up paying less. The IRS does provide tax deductions for small businesses to decrease their taxable income, recognizing that business expenses should not be taxed as profit. As we delve into some of the most potent and often overlooked tax deductions, remember to leverage all applicable deductions when preparing your small business tax return.

Top Small Business Tax Deductions Owners Forget to Claim

1. Marketing Costs

Whatever you spend as a business owner on advertising and marketing should be fully deductible. If you were an employee, you wouldn't be responsible for making those expenses so you can deduct the costs of that advertising from your income. 

Here are a few of the marketing costs you may be able to deduct: 

The cost of a public event set up for advertising purposes

Print advertising

Paid social media marketing

Services contracted from a marketing professional 

Website administration and design costs 

2. Utilities and Other Workspace Costs

More and more people are working from home these days, which means more and more home offices. If you're renting a workspace, that rent counts as a business expense. 

Suppose you're a business owner working from home. In that case, a portion of your rent costs, mortgage interest, and even your utilities can be claimed as business expenses through the home office deduction.  

3. Qualified Business Income

Since the 2017 Tax Cuts and Jobs Act, the IRS has allowed small business owners to claim the Qualified Business Income Deduction, which will enable you to deduct up to 20 percent of your qualified business income from your taxable income. 

This is a general deduction you can claim in addition to specific expense deductions, but it is only available to pass-through businesses. This means that only business owners that file their personal and business income together are eligible. It is intended to help reduce the tax burden on small businesses and encourage growth. 

4. Vehicle Use

Some self-employed people use their vehicles for business purposes. If you do, you may be able to deduct your vehicle expenses based on how much you use it for your business. 

Instead of keeping track of individual expenses, you could also record the miles you drive for work. Then you can deduct those miles from your taxes based on the standard mileage rates set annually by the IRS. 

5. Travel Expenses

If you do any overnight travel entirely for valid business purposes, you may be able to deduct the money you spend on transportation and lodging. This includes conferences or seminars out of town, or possibly visits to distant clients. 

6. Meals

While business meals and entertainment expenses are no longer fully deductible as they used to be, you can still deduct 50 percent of the cost of meals you provide for customers or employees under certain circumstances. 

If you are present, and the meal isn't overly extravagant, you can deduct half of the cost of meals you provide for a valid business need, whether it's for employees or clients while working or traveling. 

7. Employee Benefits

The IRS also encourages business owners to save for retirement by offering deductions on contributions to certain retirement accounts. You can deduct contributions to retirement plans up to a set amount each tax year. Here are some of your options for tax-deductible retirement savings plans for the self-employed:

A simplified employee pension (SEP) 

A 401(k)

A savings incentive match plan for employers (SIMPLE IRA) 

8. Insurance

If you are self-employed and don't qualify for health insurance through your spouse's employer, you can deduct your insurance premiums from your taxable income. That is a cost you are taking on because you are a business owner, and therefore it is a business expense.

Premiums for most other insurance policies related to your business should also be deductible. 

9. Necessary Fees and Subscriptions

Any regular fees you have to pay related to your business might be tax-deductible. Regular credit card fees are tax-deductible if the credit cards are not for personal use. Credit card interest on business purchases is also eligible as a business expense. 

Other deductible fees include subscriptions for business software or trade publications. If you can justify the expense as necessary for your business operations, the cost is likely fully deductible.

Prepare for Tax Preparation

The less money you spend on taxes, the more you have to keep investing in your business's future. However, to get the most out of these deductions, you'll need to keep track of your expenses during the year. 

That's why effective record-keeping for small businesses is so essential.

As a business owner facing numerous challenges, partnering with a business tax professional at 1-800Accountant can be a game-changer. They can help create a strategic tax plan ensuring you capitalize fully on tax benefits and minimize your tax liability. This partnership not only maximizes your financial resources but also provides peace of mind, knowing your taxes are handled by experts.