As the end of the year approaches, it’s time for business owners to start planning for tax season. Maximizing your deductions is one of the best ways to reduce your taxable income, ensuring you keep more of your hard-earned money. Here are some of the top tax deductions that many businesses may qualify for — and a few tips on how to take advantage of them before December 31st.
Home Office Deduction If you use part of your home regularly and exclusively for business, you may be eligible for the home office deduction. This deduction allows you to claim a portion of expenses like mortgage interest, rent, utilities, and repairs as business expenses.
Tip: The IRS provides a simplified option to calculate this deduction at $5 per square foot of your home office, up to 300 square feet. Make sure you measure accurately and maintain records to justify your space allocation.
Business Equipment and Technology Purchasing new equipment like computers, printers, and other technology essential for running your business can often be deducted. Thanks to Section 179 of the IRS tax code, you may be able to deduct the full purchase price of qualifying equipment bought during the tax year rather than depreciating it over time.
Tip: If you’re considering upgrading any technology, it’s best to make those purchases before the year ends. Keep detailed receipts and purchase records, and ensure the equipment is used primarily for business.
Professional Development and Continuing Education For service providers who need to stay on top of industry trends or maintain certifications, the cost of courses, seminars, or professional memberships may qualify as a deduction. This can include books, training materials, and even subscriptions to professional journals.
Tip: Document all receipts and the purpose of each educational expense. If you attend virtual events or webinars, the registration fees are typically deductible.
Mileage and Travel Expenses If you drive your personal vehicle for business purposes, you can deduct those miles at the IRS standard rate (67 cents per mile in 2024). Travel expenses for business trips, such as flights, hotels, and meals, are also deductible if they are directly related to your work.
Tip: To claim mileage, keep a detailed log of your trips, including dates, mileage, and the purpose of each trip. Mobile apps can make tracking easier and more accurate.
Marketing and Advertising Expenses Costs associated with promoting your business, like ads, website development, and social media marketing, are generally fully deductible. This includes any expenses for print materials, branding, and promotional items.
Tip: Track all marketing-related expenses throughout the year and review any upcoming campaigns to see if there are opportunities to increase spending before December 31st to maximize your deductions.
Insurance Premiums Business-related insurance, such as liability insurance, health insurance for yourself or your employees, and even cyber insurance, is often deductible. These premiums are considered necessary for the business and therefore qualify as a deduction.
Tip: If you’re self-employed and paying for your own health insurance, you may be able to deduct the cost on your personal return, so check with your tax advisor to optimize this benefit.
Legal and Professional Services If you’ve paid for services from attorneys, accountants, consultants, or other professionals, these costs are deductible as ordinary business expenses. This deduction can also include fees paid for tax preparation, bookkeeping, or business consulting.
Tip: Review all invoices paid for professional services and be sure to deduct these fees on your return. Professional fees can add up quickly, so don’t overlook this category.
Office Supplies and Software Subscriptions Small items like stationery, printer ink, software subscriptions, and other office supplies add up throughout the year and can be claimed as deductions. Subscriptions for software services, whether for accounting, project management, or design tools, also qualify.
Tip: Check any monthly or annual software subscriptions you use for business, and ensure you have receipts. For new purchases, consider making them before the year ends to claim them for this tax year.
Health Savings Account (HSA) Contributions If you have a high-deductible health insurance plan, contributing to an HSA can be a smart way to save on taxes while covering medical costs. Contributions to an HSA are deductible up to certain limits, providing a tax-free way to pay for qualifying healthcare expenses.
Tip: HSA contributions can still be made up to the annual contribution limit until the tax filing deadline in April, but planning ahead can be helpful for cash flow and health budgeting.
Retirement Contributions Contributing to a retirement plan, like a SEP-IRA or a solo 401(k), can help reduce your taxable income while securing your financial future. Contributions made before the year ends are generally deductible, with annual limits depending on your income and plan type.
Tip: Set up a recurring contribution schedule to make the most of tax-deferred savings options. It’s wise to consult with a financial planner or tax advisor to determine the right retirement account for your business and goals.
Tax planning is crucial to help you keep as much of your business income as possible. To make the most of these deductions, maintain organized records throughout the year and consult with a tax advisor who understands your unique needs.
With careful planning, you’ll be well-prepared to maximize your deductions, minimize your tax bill, and strengthen your business’s financial health going into the new year.
