5 Tax Breaks that Small Businesses Should Always Consider

1. Home Office

Small business owners who operate out of their residences are often eligible for a tax deduction for their home offices. This deduction allows you to subtract expenses related to the portion of your home that is used exclusively for business purposes. This can include a percentage of your rent or mortgage, utilities, and even some home maintenance costs.

It’s important, though, to meet specific criteria set by the IRS to qualify for this deduction. For example, your home office space must be used regularly and exclusively for business, and it should be your principal place of business. Keep precise records of your expenses to ensure compliance with tax regulations.

2. Section 179 Deduction

The Section 179 Deduction is a provision in the tax code that allows small businesses to deduct the full cost of specific assets in the year they were bought (rather than depreciating them over time). This can include equipment, machinery, software, and sometimes vehicles.

The Section 179 Deduction is a great opportunity for businesses because it offers an immediate tax break. Be mindful, though, that there are limits on the total amount that can be deducted in a given tax year. We suggest consulting with a tax professional to maximize this deduction for your situation.

Education Expenses

Education-related expenses are deductions that many small business owners can take advantage of. From online courses focused on marketing to personal development programs designed for enhancing your business acumen, any educational cost directly related to improving your business’s revenue-generating capabilities is considered deductible.

Professionals in specific fields may need to take courses for licensing or accreditation, and these costs are fully tax-deductible as well. This tax deduction allows small business owners to pursue the courses and credentials needed to stay on top of industry standards and be knowledgeable of economic demands and profit-generating strategies. 

Business Travel Expenses

Business travel is a possible deduction for most small companies. It’s easily missed in the whirlwind of meetings and conferences and, thus, one we want to remind you about.

This tax break includes a wide range of business-related travel costs, such as airline tickets, accommodations, conference fees, baggage charges, Wi-Fi fees, and business-related meals. However, it’s critical to maintain a distinction between personal and business expenses during travel. Be sure to carefully record and categorize your costs to ensure compliance with IRS regulations.

Research and Development (R&D) Tax Credit

The R&D tax credit first came about in the Economic Recovery Tax Act of 1981. Since then, it’s been extended numerous times, making it a viable tax credit for small businesses still today. The R&D tax credit is intended to encourage innovation and technology advancements within businesses.

It allows eligible companies to claim a tax credit for a portion of their costs accrued during research and development activities. These activities range from product development to process improvements and software development. Many businesses, particularly those specializing in technology, manufacturing, and pharmaceuticals, can qualify for this credit. Like with all tax deductions, meticulous record keeping is important to maintain compliance with the IRS.

Morgan & Associates Understand Tax Deductions for Small Businesses

 Remember, every dollar saved in taxes is a dollar reinvested in your business or paid to you, the owner. We encourage you to consider the numerous tax deductions offered to small businesses, especially the five highlighted above.

Tax deductions should be a part of your tax planning, and tax planning should be a major aspect of your overall financial planning. We’ve helped many small businesses optimize their tax planning, and we’d love to assist you too.

Use the contact form below to start a conversation with one of our small business tax experts.