If you have recently started your own business, it’s crucial that you learn about tax write-offs. This can help you lower your taxable income and in turn, reduce the total taxes that you owe at the end of each tax year.
Since many business owners find the concept of tax write-offs confusing to begin with, it’s common to feel out of your depth with these calculations. But it’s not impossible to master this practice with some knowledge and a little focus to boot.
To help you through this learning curve, here is a quick guide on tax write-offs as well as top tax deductions every small business owner should know.
What is a Tax Write-Off?
A tax write-off is an expense that you can deduct from your taxable income. This helps you lower your tax threshold and also lets you reduce the overall tax bill that you need to pay at the end of every tax year. Tax write-offs are also known as deductions and remain an integral part of every beginner’s guide for small business taxes.
How Do You Claim Tax Write-Offs?
You can claim tax write-offs by keeping and showing records of your business expenses. Besides the spent amount, this should typically also show a timestamp for your transactions. This not only helps your accountants with filing your returns using a tax business software, but also prevents unnecessary issues in claiming these write-offs. With that being said, the documentation for your write-offs usually depends on the type of expenses that you want to deduct.
Most Common Tax Write-Offs For Small Business
Now that you know what tax write-offs are and what they do, here’s a list of the most common tax write-offs for small businesses.
Rent
Whether you rent a desk through a coworking space or get an open concept office of your own, you can report your business rent as a tax write-off. This can shave off a noticeable portion of your taxable income.
Utilities
While you can consider reducing taxes with an Asian company structure and similar tips, you can take the easier route of deducting your utility bill payments from your taxable income. This can also make a world of difference for your tax bill.
Equipment Expenses
From laptops to sewing machines to everything in between, if you use a piece of equipment for your business, you can include it in your tax write-off. This can help you save some money in your business bank account.
Travel Costs
You can deduct your vehicle expenses from your taxable income. To execute this write-off, you need to maintain a clear log of your travels and fuel expenses. You can also do the same thing for other business travel costs that you can track from your trip planning app.
Vendor Fees
In case you hire business services to support your operation, you can also write them off as deductions from your taxable income. You don’t need to live in the richest states of the U.S. to file these write-offs either: You can do it from wherever you live in the country.
Educational and Training Costs
If your line of work requires you to go through consistent training to meet the evolving standards of your industry, you can also report those expenses as tax write-offs. This also applies to other types of education that you need to pay for to support your qualifications and business.
Marketing Spend
This is one of those expenses that may take you by surprise due to being classified as a tax write-off, but many businesses take benefit of it every year. You just need to make sure that you are accurately reporting this spend.
How Do You Know Which Expenses Can Be Classified As Tax Write-Offs?
While the information above gives you a lowdown on the common expenses that you can report as a tax write-off, they are not the only categories where you can use this classification. By looking into your industry standards or talking to a tax accountant, you can make sure to get the most out of this strategy. From there, you can build a stronger financial foundation for your business.
