5 Tax Deduction Answers for Small Businesses

In 2015, small businesses may expect continued strict banking standards for loans. Only 30% of new businesses survive 10 years or more. A lack of funds is the main cause of new business failure. It is important for small businesses to strategize with available funds. These tax strategies will allow a small business to lower tax liability and maintain the bank balance.

  1. Advertising: Advertising expenses may be deducted. Business cards, package designs, flyers, newspaper ads, radio, television or internet advertising, catalogs, public relations fees or display racks that establish goodwill or promote a product, service or business name are tax deductible. Advertising for open employment positions or to persuade legislation is not considered an advertising expense; however, help wanted advertisements may be deducted as a business expense.
  2. Bad Debts: The Internal Revenue Service allows a business to deduct an uncollectable debt on taxes if the debt meets certain qualifications. The expense must have been claimed as a profit on the previous year’s taxes. The business must have attempted to collect the debt for more than a six month period. The debt is a tax deduction during the year that it is considered worthless. Charges for services that have not been performed do not qualify. Charges for products not delivered may not be considered a tax deduction for a bad debt. Health, engineers, consultants and other service oriented professions may consider nonaccrual experience method for tax deductions.
  3. Deduct Automobile Expenses: Maintain an actual mileage ledger of miles driven for business purposes. The destination, purpose and odometer reading at the start and stop of the trip should be recorded. Automobile insurance, depreciation, maintenance, parking fees, repairs and toll bridge/road charges may be deducted on taxes.
  4. Education Costs: Education and training classes attended by the business owner or employees related to the business functions are sometimes tax deductible. To qualify as a tax deduction the education or training class must meet certain guidelines. The education or training class must either be required by the employer or law to maintain the employee’s current status, job or salary. The education serves a bona fide business purpose of current employer. The training maintains or improves the current level of skills. The training must not be part of a program of study to qualify employee or owner with a new trade.
  5. Home Office: Rooms that are utilized exclusively for business purposes may be deducted on taxes. A garage used to warehouse products may not serve as a playroom for children and be considered a tax deduction. A percentage of housekeeping, depreciation, insurance, maintenance, rent and utilities may be deducted. In addition, a percentage of the telephone and internet bills utilized for business purposes may be deducted.

*Photo courtesy of Tax Torn by Chris Tolworthy at Flickr’s Creative Commons.

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