Some people would characterize an entrepreneur simply as a person who starts a new enterprise. Entrepreneurs would define themselves as individuals who find hidden gems, who organize resources, workforce, and funding in order to produce a product or a service, who take big risks and face failure on a daily basis. These people are the very center of the American economy. After all, America was founded by small businesses.
After all the hard and diligent efforts one must put in to create their own mini-empire, after jumping through countless legal and financial hoops, it comes as no surprise that come April 15th, you might not be feeling very charitable towards the government. But unfortunately, taxes are a fact of life, and being meticulous about them will keep you out of trouble, and may also help you save more money than your less-meticulous small business counterparts.
The Internal Revenue Service (IRS) has a ridiculously complicated rule book on what you are and what you are not allowed to deduct. These detailed rules go so far as to tell you what percentage of each deduction can be written off and whether or not you should count your bathroom as part of your home office. But at the end of the day, following these regulations will save your business money. Some deductions to take advantage of:
The two standards you must meet to qualify for a home office deduction are proving your home to be a place of (1) regular and exclusive use and (2) a principal place of business. This means you “must regularly use part of your home exclusively for conducting business,” and you have to be able to show that your residence is the primary place you conduct business. Don’t forget to include your bathroom — even big businesses let their employees pee. Double check on Portfolio.com for details so as no to misuse this deduction.
Food and Entertainment
KEEP YOUR RECEIPTS. The number one rule of taking deductions, especially as this particular deduction tends to lead to audits. But when handled with care and diligence, it can help your tax liability. The main rule behind this deduction is that you have to be doing business during the meal or entertainment, or immediately before or after it. FYI, these are only 50% deductible.
Using Your Car for Business
This is a non-contested deduction. If you are using your vehicle for meetings and events in your local area, deduct the mileage used based on the standard mileage rate. Might as well get a break if you can’t afford to buy yourself that company car.
Hopping a plane to a seminar out west? Deduct it. Going on a road trip to scout locations and meet vendors? Deduct it. Just make sure that the trip has a specific business purpose before you depart. And the great thing, travel expenses are 100% deductible.
And these are just a few of the many deductions out there to help your new business keep on chugging. There are write offs for state sales tax, advertising expenses, software expenses, out-of-pocket charitable donations, and more. If scrutinized carefully and handled with a bit of tact, deductions are a very intelligent way to help keep your business strong and chugging along.Subscribe to the Podcast