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The Best Tax Deductions to Ensure a Larger Business Tax Refund

No business owners wants to pay Uncle Sam more than she owes him, but keeping up with tax deductions can be a combination of tricky, confusing, stressful or all of the above.

In fact, two of the traditionally largest tax deductions for small businesses are also the two most difficult to take. Let’s take a look at these deductions and why they can stress us out (and why we think you should still take them!)

The Home Office Deduction

If you regularly and exclusively use a portion of your home for business, you may be eligible for the home office deduction. This means you can write a percentage of your rent or mortgage, property taxes, repairs and utilities off on your tax return.  For instance, say you live in a 2,000 square foot home and your home office is 200 square feet. You could write 10% of your rent/mortgage, property taxes, and utilities off on your taxes. This adds up to quite a big number by the end of the year!

Even if you don’t think you have a “home office,” you might. If you sell a product, the closet or garage you use to store your wares might qualify as long as you meet the IRS’s rules about using the space exclusively for business purposes.

The rumor mill plagues this deduction, though. Some rumors hold that taking this deduction will depreciate the value of your home when you go to sell it. Others say that taking the home office deduction makes you more likely to get audited. While often highly exaggerated, both of these rumors have some grain of truth, so ask your accountant before taking the home office deduction.

Vehicle-Related Deductions

Expenses related to getting around for business purposes can also be deducted on your small business taxes. The IRS allows a small business owner to either take a “standard mileage” or “actual expense” deduction when it comes to using their car for business purposes.

The standard mileage deduction basically allows you to write off a set amount for every mile driven for business. The IRS currently sets the standard mileage rate at 56 cents.

The actual expense deduction allows you to report actual vehicle expenses when your vehicle is used for business. This includes expenses like lease payments, registration fees, licenses, gas, insurance, tires, tolls and the like.

The catch is that, whatever method you choose to use, you must thoroughly document how you use your vehicle for business purposes. While either of these types of deductions will save you lots of money on your tax bill, you’ll need to be able to show why you took them should the IRS ever come calling.

Don’t Forget these Deductions

Other deductions you shouldn’t forget to take include:

  1. Office supplies – staplers and printer paper add up!
  2. Advertising and marketing – anything you spend to promote your company can be written off on your taxes
  3. Insurance – business insurance is a tax deduction
  4. Licenses – the fee you pay for any licenses you need for business is a tax deduction
  5. Fees for tax preparation – your accountant’s charges for talking to you about your tax deductions are also a tax deduction!
  6. Business tools – software, apps and other tools you use to run your business
  7. Gifts – gifts to clients under $25 can be deducted on your taxes

There are plenty more tax deductions we didn’t mention here. If we missed a tax deduction you regularly take, let us know in the comments!

Jennifer Dunn

Jennifer Dunn

Contributor at Fundera
Jennifer Dunn is a small business contributor for Fundera and owner of Social Street Media. She is also the community manager at GoDaddy Online Bookkeeping, and her long-standing life goal is to learn something new every day.
Jennifer Dunn