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Little Known Small Business Tax Deductions

December 15, 2013

In Section 162 of the IRS tax code, it’s stated that to qualify as deductions, business expenditures should be “ordinary and necessary.”

Fair enough. But with tax laws and the way business is conducted constantly changing, maybe the real danger is not that inappropriate deductions are taken, but rather that you as a business owner don’t take advantage of the legitimate expenses and deductions available to you.

Here are a few valuable business tax deductions that are easy to overlook. Some of them might be appropriate for your company.

Always consult a qualified professional for any questions you have relating to tax matters. For a referral, contact MP Star Financial at 800-833-3765 Ext. 150.

Start-Up Costs

Even if you’re out of the start-up stage, there still could be a benefit here. You can deduct up to $5,000 in start-up costs the first year. Start-up costs can include most expenses associated with getting your enterprise up and going – travel, training, advertising, etc.

But here’s the kicker: any start-up costs in excess of the $5,000 deducted in the first year can be amortized over the next 180 months – that’s 15 years!

Go back and check your receipts and travel records from your first year in operation. And ask your accountant about legitimate start-up expenses incurred by similar companies during their first years in business, then see if anything jogs your memory.

Uncollected Debts

Bad debts are sometimes an unfortunate part of running a small business. But the silver lining, sort of, is that you can claim a deduction for an uncollected debt tied to a specific receivable.

To get the deduction, you must have included the amount owed in your company’s gross income for the tax period.

Back to School?

It’s easy to forget that certain education expenses for you or your employees can be deducted from your tax liability.

But there are conditions. The class work or other training must be applicable to your current work situation. This means that either:

a.) It is required by law to maintain a professional license, or,

b.) It must directly improve or help sustain the skills needed to conduct your business

If the training qualifies, you may also be able to deduct related expenses like travel, books and support materials.

Professional Fees

You probably know that you can usually deduct fees paid to your lawyer or accountant, but don’t forget about what you’ve paid out to other professionals who aren’t on your payroll.

Expenses associated with consultants, speakers, seminar leaders, trainers, computer techs, graphic artists, and others your business has worked with are likely legitimate expenses.

Have your department heads keep careful track of who’s been paid to do anything during the tax period.

Employee Parking

If you want to give your employees a nice perk, you can provide up to $245 per month in parking vouchers.

The tax benefit for you is that, unlike regular wages, the amount is exempt from federal employment taxes.

Cloud-Based Software Programs

Don’t forget about the costs of your business software just because it doesn’t come out of a box.

Monthly usage fees for SalesForce, NetSuite, Coupa, and other cloud-based utilities are deductible.

Gift Giving

A gift given directly to a client or employee is deductible, with a limit of $25 per person each year.

Business and Trade Association Dues

You can deduct the cost of membership dues to organizations and groups that are required to run your business. This can include a chamber of commerce, a professional association, or trade group.

Bank and Credit Card Fees

Fees associated with business banking accounts and credit card activities are deductible for the tax year in which they are incurred.

Some banks and credit card companies provide a list of these fees at the end of each year. If yours doesn’t, make sure you carefully review your monthly statements.

The Key to Significant Tax Savings

Some of these deductions taken by themselves may not add up to considerable tax savings, but here’s the key: Learn to think incrementally.

Added together, a few minor small business tax deductions can add up to a meaningful reduction in your tax liability. Billy Martin, the hall of fame baseball manager once remarked that there’s nothing wrong with “hitting lots of singles.”

That’s a good way to look at your company’s tax planning.

Are cash flow problems impacting your company’s ability to grow? Stop waiting 45 or 60 days for payments! MP Star Financial can help you get a better handle on your company’s cash flow management. Call for more information. 800-833-3765 Ext. 150.

David Dalton
David has more than 10 years of experience writing about marketing, communications and business development issues, largely in the fields of medicine, healthcare and financial services. He earned his MBA at Case Western Reserve University in marketing/finance.
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