Starting and running a small business is expensive. There are many different costs that go into operating a business, but many can be tax write-offs.
For an expense to be deductible, the cost must be both “ordinary and necessary,” according to the Internal Revenue Service (IRS).
An ordinary expense is defined by the IRS as “one that is common and accepted in your industry,” and a necessary expense “is one that is helpful and appropriate for your trade or business.”
SURGE IN US SMALL BUSINESSES STARTED AS SIDE HUSTLES
When it comes to filing taxes as a business owner, it is extremely helpful to work with a tax professional who can help you navigate tax deductions.
Below is more information about tax write-offs and common examples of business expenses that could be deductible.
“A deduction is an amount you subtract from your income when you file so you don’t have to pay tax on it,” according to the IRS.
Expenses can be deducted that are for your business, not ones that are for personal benefit, according to Investopedia.
You can further look into what tax deductions you may be eligible for by using the IRS Tax Guide for Small Business.
ONE-THIRD OF SMALL BUSINESS OWNERS WORRIED THEIR COMPANY WON’T SURVIVE 2024
Diligently keeping track of all business finances throughout the year and working with a tax professional can also help make the filing process easier as a business owner.
There are a multitude of expenses that could be considered tax deductions for your small business. Below are among the common examples.
For each of these categories, the IRS dives far deeper into the details and stipulations.
For example, when it comes to auto expenses, there are two different ways to claim this particular deduction. One is the standard mileage rate, where you add the miles you drove and multiply that by the IRS’s standard deduction rate, according to Ramsey Solutions.
START YOUR OWN BUSINESS: HOW TO MAKE YOUR SIDE HUSTLE DREAM A REALITY
Keep in mind that this number has fluctuated over time, but in 2024, the standard mileage rate is 67 cents per mile.
You can also claim auto deductions by adding up all the car-related expenses you’ve had over the years, including gas, repairs, insurance, etc., which is a bit more tedious way to do it.
Expenses big and small can be considered deductions, and every cost counts. From office supplies like pens, papers and notebooks, to large equipment rentals and business events, ensure you are keeping track of all costs.
When looking into tax deductions, and what is considered one, the IRS’ detailed guide can help business owners make that determination.
START YOUR OWN SMALL BUSINESS IN 10 EASY STEPS
Tax deductions are reported when businesses file their taxes.
An individual that is a sole proprietor should fill out Schedule C to report the income or loss of their business, according to the IRS.
This form is usually attached to an individual’s 1040 tax return, per TurboTax.
When you own a small business, it’s vital to keep track of your expenses in an organized format to ensure you have all the accurate information when it does come time to file.
GET FOX BUSINESS ON THE GO BY CLICKING H5ERE
Having a business bank account separate from your personal finances, keeping track of receipts and recording all expenses are just a few ways to help streamline the process.
Additionally, working with accounting software can help keep everything organized, digital and up to date, so you have easy access to your business’s financial information.
