Preparing your taxes is an arduous process, but it’s a responsibility that all business owners must undertake to stay financially compliant with the government. A missed filing can be costly and result in unnecessary fines and penalties. However, the good news is that there are lots of small business tax deductions available that can reduce your tax liability. In this guide, we’ll walk through a few common deductions available to entrepreneurs and provide tips to streamline your filing process.
Common Small Business Tax Deductions
The IRS offers dozens of small business tax deductions that may apply to your organization. Here are a few of the most typical.
Business Use of Your Home
Small business owners who primarily work from home can deduct expenses for real estate taxes, rent, utilities, mortgage interest, depreciation, and maintenance on the portion of their home used for business. If calculating the expense is too complicated, a simplified option allows business owners to deduct up to $1,500 yearly for the home office.
Business Use of Your Car
People who use their vehicles for business purposes can deduct actual expenses for gas, oil changes, repairs, and insurance. You can calculate your deduction using the standard mileage rate if you don’t have complete records of your vehicle’s operating costs. The standard mileage rate is $0.585 from January 1 through June 30, 2022, and $0.625 per mile from July 1, 2022, through December 31, 2022.
The IRS allows companies to deduct 100% of the cost of business meals, including tips and taxes, as long as the owner or an employee is present. Meals that aren’t overly extravagant qualify for the deduction.
Advertising and Marketing
Business owners can deduct all their expenses for advertising their products or services. Google ads, billboards, commercials, and paid social media posts qualify for the deduction as long as they directly relate to your business operations.
NYC-Specific Small Business Tax Deductions
New York City has several small business tax credits you may qualify for.
Hire a Veteran Credit
The Hire a Veteran credit is available to companies that hire a qualifying veteran in a part-time or full-time capacity for at least twelve months. Companies can claim up to 20% of wages paid for disabled veterans and 15% for non-disabled veterans.
Unincorporated Business Tax Credit
Business owners residing in New York City may qualify for the Unincorporated Business Tax (UBT) Credit, which allows them to claim up to 100% of their UBT as a deduction. The credit phases out for taxable incomes above $142K.
3 Tips for Maximizing Your Deductions
You’ll want to follow a few specific tips to ensure you don’t pay more than you owe in taxes.
1. Keep Good Records
Maximizing your deductions starts with you. Ensure you track all of your business expenses throughout the year. Keep and store all your receipts, so they’re easily retrievable when you begin the tax return process. That way, you don’t miss out on any forgotten expenses associated with your business.
2. Take Advantage of Tax Credits
Tax credits reduce your tax liability dollar for dollar. Your small business may qualify for federal or state government tax credits. Research the available tax credits to determine whether any apply to your small business.
3. Get Help From A Tax Pro
Taxes in NYC are notoriously complex. Rather than handle your tax return yourself, consider getting help from tax experts. A qualified tax accountant can prepare your taxes, ensuring you don’t miss any applicable deductions or credits.
Contact NYC’s Premier Small Business Accountants
A tax advisor at Raines & Fischer can help you maximize the small business tax deductions available. Contact our office today to schedule your appointment with a qualified member of our tax advisory team.