If you are a business owner, you may be entitled to some (or all) of the following deductions. Talk to your CPA to see which of these may apply to you to reduce your tax liability and make any adjustments prior to year end.
Home Offices
If you use your home office for business purposes, you may take the home office deduction, but the area must exclusively be for business (using a laptop on the kitchen table doesn’t qualify). This also applies to employees who work from their home office for the convenience of their employer.
Vehicles, Travel, and Entertainment
A percentage of the cost of an owned or leased vehicle can be deducted if it is used for business travel. Oil and gas costs can also be deducted at the same percentage. However, you may want to consider the straight mileage deduction method which is relatively easier to calculate.
Other travel related costs, including lodging and air fare, can be deducted if the primary purpose of the trip is business-related.
Entertainment and meal costs for customers and clients can be deducted up to 50% if certain requirements are met. Make sure you can provide proof of business use by observing strict recordkeeping requirements. For example, keep records of the clients attending the event/meal and the purpose of the meeting in order to prove the business expense in the case of an audit.
Property
Under Section 179, business property owners are able to expense an allowance on their tax returns as an alternative to depreciation deductions Note only the cost of the property placed in service during the year can be expensed.
Production
Section 199 allows businesses to deduct 9% of income from qualified production activities. This is a complex calculation and requires the deduction be less than 50% of W-2 wages paid. This deduction is not limited to manufacturing firms.
Health Insurance
Due to recent tax law changes, health insurance for both employees and self-employed business owners, including coverage for spouse and dependents, is 100% deductible.
Retirement Contributions
Contributions to company retirement plans, such as SEP or 401(k) plans, are deductible Self-employed business owners can deduct SEP contributions for the tax year including those made as late as the extended due date for personal tax returns.
Not all businesses qualify for each of the deductions listed above. Always speak with your CPA regarding tax deductions, and make sure updates haven’t occurred due to late passage of legislation. For more information on tax deductions and credits visit IRS credits and deductions.