Small business owners face quite a responsibility when it comes to filing taxes. Your accountant or tax professional may not know every expense you’re incurring as a business owner. This year, be sure to ask your tax adviser about these important—but often overlooked—expenses as you work through your small business tax filing.
Today, it’s hard to get by without utilizing at least one subscription to digital software that will help you operate your business. Whether it’s QuickBooks, Microsoft Office 365, a project management tool, or even a website subscription, you can deduct the annual or monthly subscription fees. This is because software subscriptions are usually necessary for a company to to operate effectively, so they’re seen as a necessity.
Business owners often spend significant time traveling, for everything from business pitches to conferences. It’s well known that car mileage and gas expenses can be deducted, but what might not be well-known is that all travel costs can be deducted. This includes airfare, bus rides, train tickets, taxis, and even hotel stays. If not reimbursed by the business, all or a portion of these may be tax deductible. Remember, entertainment costs will have to be substantiated to be deducted—that means keeping records like receipts and bank statements.1
Business owners often hire other professionals to perform necessary services in areas where the owner themselves is not an expert. The fees paid to your attorney, your accountant, or any other ordinary and necessary fees paid to professionals who support your business are tax-deductible.2 This is true, even when the resource is online; an important distinction with many business owners turning to web resources for everything from legal help to tax preparation.
4. Office Supplies and Furniture
Yes, the cost of any office supplies purchased for use at your business can be deducted. If you keep any office supply receipts, you’ll be able to legally write those purchases off, giving you more off your total owed taxes. Office furniture purchased through the year can also be deducted, but the deduction works in two ways. You can either deduct the total cost of the furniture at once when you file, or you can spread the cost over a seven-year period (known as depreciation).3
The cost of advertising, whether it’s in print, business cards, or radio airtime, can be deducted from your taxes as a necessary operating expense. Promotion, like sponsoring a local sports team or charity event, can also be deducted provided there’s a clear link between your business and the organization you’re sponsoring. That “clear link” can be something as simple as your business’ name printed in a program or on signage or shirts as a sponsor.
For small businesses dealing with clients, there is always a risk of non-payment. Fortunately, there are some deductions that can be made to help remedy these situations. If your business sells goods and someone didn’t pay their bill, you can deduct the expense of the goods you didn’t get paid for from your yearly taxes. Unfortunately, the same rule doesn’t extend to those who sell services, who can’t deduct their unpaid invoices.4 This is because services often only require time, whereas a good purchased from a retailer requires a wholesale expense from the business before it can be resold to the consumer.
If you’re planning to claim any of these expenses on your business taxes from 2016, coordinate with your accountant or tax professional to ensure you bring the documentation they need. Claiming these expenses can help business owners reap returns on the year-round investments they make into their day-to-day operations.