6 Tax Credits for Your Small Business You May Not Have Known About
It’s that time of the year again when you will need to get all your paperwork for your small business in order and get ready to file your taxes. This time can be stressful for many small business owners. But rest assured, this doesn’t have to be a time of the year that you come to dread.
Hiring a CPA (certified public accountant) for your small business can help make this process much more organized and more manageable.
And most importantly, they are well informed about tax credits. So, you don’t have to leave an opportunity that your small business qualifies for on the table, overpaying for taxes. Let’s look at a few tax credits that small business owners often overlook.
Meals and Entertainment
You may not know it, but you can deduct 50 percent of your lunch meals. You can take advantage of this tax break as long as the business owner is present and the topic of discussion during the business lunch is business-related. The lunch meal can’t be extravagant, however. It has to be for ordinary business purposes. Take-out meals are acceptable, too, as long as the food isn’t catered from a grocery store. Meals at an entertainment venue also count, as long as you can separate the bill from the entertainment since entertainment isn’t a deductible expense. From January of 2021 and lasting until December 2022, small business owners may take advantage of the temporary 100 percent tax reduction for meals.
Cell Phone and Internet
Another deduction you can take is for your cell phone and internet usage for the year. The key to getting this deduction is to document what percentage of your phone you use for business. To avoid this, you can opt to get a separate cell phone for business or even a different cell phone line. However, if you use the same phone line as your personal phone, you will have to account for how much you use your phone for business calls. Keep in mind calls aren’t the only consideration. If you use your phone to post to your company’s social media, this counts. Also, if you text or email clients, this counts. Likewise, you can do this with your internet. You have to ensure you track how much of the internet you use for business purposes.
Business Travel
You may not be aware of it, but you can also deduct your business travel. The rule is you have to be traveling for business purposes, and it can’t be to your place of business. These travel expenses don’t have to be in your own vehicle either. If you didn’t have a car, even if only temporarily, and had to use taxis, buses, Uber, or Lyft to get to your destination for business, this counts.
Business Use of a Vehicle
You’ll be happy to know that business travel isn’t the only expense you can deduct. If you use your own vehicle for business purposes, you can also deduct this. One way is to deduct the vehicle’s operating costs if the entire vehicle is used strictly for business. For instance, all operating costs are deductible if you drive a truck for your landscaping business. But if you own a vehicle and use it sometimes for personal use and sometimes for business, you can deduct the business portion of expenses. You can do this by deducting your mileage or by tracking all car costs for the year and multiplying it by the percentage of your mileage.
Healthcare Premiums
If you operate a small business and you don’t take advantage of tax breaks throughout the year for your healthcare premiums, you may be able to claim these as a tax deduction. However, keep in mind that in addition to not receiving a tax break, you also can’t qualify for other insurance, such as that offered by an employer or through a spouse’s company.
Education Expenses
One more overlooked expense that small business owners can deduct is education. When most business owners think of education, they assume it has to be for college. Therefore, they don’t think they qualify because they aren’t taking college coursework. However, education expenses expand beyond traditional educational institutions. These could include online classes, conferences, lectures, and even books. Your goal is to point out how relevant these items are to your work. For instance, if you are a makeup artist and took courses to enhance your skills or attended a conference related to your career, you may qualify for a tax deduction.
These are some of the six most overlooked deductions for small businesses but certainly aren’t all of them. But if you want to keep up with the most up-to-date info on tax deductions for small businesses, it is good to consider hiring a CPA.
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