Top Tax Deductions Small Business Owners Overlook
Welcome to ‘Tax Time Talk’—a special series where we break down tax season topics in a way that makes sense!
Running a small business is rewarding, but when tax season rolls around, many entrepreneurs miss out on valuable deductions that could save them money. Here are some commonly overlooked tax deductions that small business owners should take advantage of:
1. Home Office Deduction
If you use part of your home exclusively for business, you may qualify for a home office deduction. This includes a portion of rent or mortgage, utilities, and maintenance costs. The IRS offers a simplified option at $5 per square foot, up to 300 square feet.
2. Business Mileage
Do you drive for business purposes? If so, you can deduct mileage at the IRS standard rate (for 2024, it’s 67 cents per mile). Alternatively, you can deduct actual car expenses such as gas, repairs, and insurance if used primarily for business.
3. Startup Costs
New business owners can deduct up to $5,000 in startup costs, including legal fees, market research, and advertising expenses incurred before launching operations.
4. Professional Development and Subscriptions
Courses, certifications, books, and industry-related publications that help improve your business skills are all deductible.
5. Retirement Contributions
Self-employed individuals can contribute to a SEP IRA, Solo 401(k), or SIMPLE IRA and deduct contributions, reducing taxable income while saving for retirement.
6. Health Insurance Premiums
Self-employed business owners may be able to deduct health insurance premiums for themselves, their spouses, and dependents.
7. Business Insurance
General liability, property, and professional insurance policies are fully deductible expenses.
8. Software and Technology
Subscriptions for accounting software, marketing tools, and other essential business applications qualify as deductible expenses.
9. Bank and Merchant Fees
Transaction fees from PayPal, Square, or Stripe, as well as business bank account fees, are deductible.
By leveraging these often-overlooked deductions, small business owners can minimize their tax burden and keep more money in their business. Consult a tax professional to ensure you’re maximizing your deductions while staying compliant.
Want to go deeper? Check out the "Self-Employment 101: Tax Fundamentals for Entrepreneurs" course, or download the free "The Basics of Self-Employment" Guide.
