8 Tax-Deductible Business Expenses

Businesses regardless of size, type, and sector incur different expenses, ranging from startup costs to operational and asset expenses.

According to the Internal Revenue Service (IRS), helpful and reasonable expenses that assist a business in generating income are tax-deductible. As a result, you reduce your tax liabilities and improve your bottom line. Learn eight tax-deductible business expenses so you can leverage them to lower your business taxes.

1. Administrative Costs

Almost every enterprise incurs administrative costs to keep it operating smoothly and profitably. Fortunately, most of these expenses are tax-deductible and include rent, utility costs, payroll, office supplies, equipment rental, and permits.

Other deductible administrative costs are computer software, bank charges, office renovations, consultant fees, and postage and delivery.

2. Auto Expenses

When vehicles are used for business purposes, the costs incurred are tax-deductible. However, commuting to and from work is not regarded as a business expense and is exempted in this category.

The two main ways for determining your business' vehicle deductions are using the standard mileage rate (which varies year to year) and the actual expense approach. In the latter, the vehicle's operating costs - insurance, gas, maintenance, and depreciation are considered.

3. Employee Benefits  

Apart from salaries, employee benefits such as bonuses, retirement programs, health insurance, and training costs can be subtracted from your taxable income. Retirement plans, for instance, allow businesses to enjoy tax advantages since the employer's contribution is a deductible business expense. Similarly, the costs incurred training employees to enhance their skill sets get a tax break.

4. Travel Expenses

If you are traveling for work-related purposes, the expenses incurred are deductible. Whether you are traveling to meet with clients, partners, and suppliers, or attending seminars and conferences, expenses such as airfare, accommodation and meals, and car rental are fully deductible. However, some restrictions may apply to certain types of travel like overseas travel.

5. Advertising Costs

Advertising is a crucial part of any enterprise to increase awareness and visibility. Every year, businesses spend significant amounts of money on both digital and traditional advertising. Fortunately, advertising is deductible, and any funds used to promote a business get tax advantages. It includes the cost of printing flyers, brochures and business cards, launching a new website, and running online campaigns.

6. Business Insurance and Interest

If you have a business loan, you can deduct the interest as a business expense. However, loans used for both business and personal purposes are not fully deductible. Only the portion used for business is a business expense.

Businesses purchase various insurance coverages to protect themselves and assets. Whether you have auto insurance, fire insurance, or liability insurance, your premiums are deductible and you can attain significant tax savings.

7. Business Use of Home

Business owners using part of their home for business purposes - perhaps a business office - are eligible for substantial tax deductions. The prominent home office deductions include rent, home insurance, utility costs, mortgage interest, and repairs. The deductible depends on the amount of space in a home used. While this type of deduction has numerous restrictions, 1.6 million people use it annually.

8. Professional Fees

Your business may require the expertise and experience of professionals such as accountants, lawyers, surveyors, and tax professionals. However, you don't have to shy away from these professionals since they are deductible business expenses. At the end of the year, you deduct their fees from the taxable income.  

Deductible business expenses are an excellent way to decrease the tax you pay and save money while increasing profitability. However, these deductibles are complex and time-consuming to file and require the expertise of professional tax services.

Get in touch with William and Associates Tax Services for consulting and guidance to navigate deductible business expenses and other tax issues.