Important Tax Deductions Every Business Owner Should Use

Important Tax Deductions Every Business Owner Should Use

Business tax deductions work by lowering your taxable income, thereby lowering the amount of tax you owe toward your tax return. In order to claim the most deductions possible carefully review this list of deductions to see if they apply to your business, then reach out to your financial planner or tax consultant for clarity with accurate bookkeeping records.

Entrepreneurs, freelancers, and small businesses are allowed to write off a range of business expenses when filing their income tax.  These expenses include:

  • Startup Expenses
  • Postage
  • Business  associated travel
  • Educational
  • Advertising and Promotion
  • Business phone and internet
  • Business Insurance
  • Health Insurance premiums
  • Home Office Expenses
  • Office Supplies and related expenses
  • Business Meals
  • Work-related car use including maintenance
  • Business Interest and Bank Fees
  • Foreign Earned Income Exclusion
  • Interest on Loans
  • Depreciation
  • Real Estate Tax
  • Professional Service and Consulting Fees
  • Salaries, Benefits, Vacation Pay to employees
  • Moving Expenses
  • Home Energy Credits
  • Client and Employee Entertainment

Personal Tax Deductions for Business Owners

Charitable contributions

Business owners are able to claim their qualified philanthropic deductions on Form 1040 Schedule A attachment.

Child and dependent care expenses

If you pay someone for childcare or a codependent member, you may be able to claim the Child and Dependent Care Credit. Refer to IRS Publication 503 regarding limits and form requirements.

Retirement contributions

Depending on the retirement plan, business owners who contribute only to their own retirement funds can claim the deduction on Schedule 1 attached to their Form 1040.

Health care expenses

Out-of-pocket medical costs, like co-pays and prescription costs, can be deducted like the health plan premium and should be itemized on Schedule A.   A Self-employed business owner to itemize and deduct health insurance premiums for themselves, their spouse, and dependents.

How Can I Benefit From A 100 Percent Tax Deduction?

100% tax deductions are business expenses of which 100 percent of it can be claimed on the owners’ income taxes. These deductions can result from:

  • Annual business phone bills
  • Health premiums for the self-employed
  • Up to $25 per person per year as gifts to employees and clients
  • Office equipment, like computers, printers, and scanners
  • Business travel and its associated costs, like car rentals, hotels, etc
  • Furniture purchased entirely for office use in the year of purchase

What Do I Do Next?

Contact me to identify which deductions you can claim, which forms you require, timelines, deadlines, and anything else related to Financial Management and Tax Planning.

Learn More Here

www.JefferyLevine.Solutions
What is a Section 179 Deduction

What is a Section 179 Deduction

Section 179 of the IRS tax code permits businesses to subtract the entire purchase price of qualifying equipment and/or software purchased or financed during the tax year whether it is new or used from their gross income potentially providing the company with greater tax relief. The Section 179 deduction has also been incorporated in many of the recent Stimulus Acts and Congressional Tax Bills.

For most small businesses Section 179 allows for the entire cost of qualifying equipment to be eligible and written-off on the 2020 tax return (up to $1,040,000). Section 179 caps the total amount that can be written off at $1,040,000, and the equipment purchase price at $2,590,000 for the 2020 tax year. The deduction is eliminated once $3,630,000 in purchases is reached, an amount usually applicable to small and medium-sized businesses in a calendar year.

Does my business qualify for Section 179 Deductions?
All business entities that purchase, finance, and/or lease new or used business equipment and place it into service during tax year 2020 should qualify for the Section 179 deduction presuming they are within the spending limits. Although $1,040,000 of assets can be expensed that amount phases out dollar for dollar when $2,590,000 of qualified assets are placed in service and used for more than 50% of the time toward business purposes to qualify this deduction.


What Happened to Bonus Depreciation?
Bonus depreciation has been useful to qualifying large business entities but was not always available as a deduction every year while restricting the deduction to include only new equipment. As of this year not only is bonus depreciation available, but it now allows deductions of used inventory beyond the Section 179 spending caps at 100% until 2026.
Even businesses with net losses or no taxable profits still qualify to deduct some of their equipment costs and carry their losses forward under Section 179 and with Bonus Depreciation deductions.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.


For basic guidelines regarding when and how to apply these provisions, which forms are required, to evaluate your equipment purchases for deductibility, or to discuss your tax planning matters please refer to the contact page at JeffreyLevine.Solutions to schedule your free consultation. I am looking forward to hearing from you.