Tax credits and deductions are typically offered to small businesses each year. With a little planning, you can prepare to take advantage of the deductions you may be entitled to. The high-level summary of deductible business expenses from the Internal Revenue Service (IRS) can help you get started. Read on to learn what expenses your business may be able to claim.
Equipment and Software Purchases
Your business may qualify for the Section 179 Deduction if you purchased eligible equipment throughout the tax year. This deduction typically allows businesses to claim the full purchase price of any qualifying equipment. Some eligible items might include machinery, printing presses, office furniture, computers and computer software, according to the IRS.
Insurance premiums related to issues like malpractice, workers’ compensation and property coverage are usually deductible as business expenses, says the IRS. Life insurance and car insurance premiums may be deductible as well, though eligibility depends on circumstances surrounding the coverage — such as who is listed as the beneficiary or how you calculate car expenses. It may be best to confirm eligibility with your tax advisor.
If your business meets the below qualifications, you may also be able to claim the small business health care tax credit, according to the IRS.
- Has less than 25 full-time equivalent employees.
- Pays average annual wages less than $50,000 per year per full-time equivalent employee.
- Offers employees a qualified health plan.
- Pays at least 50 percent of the health care coverage costs per employee (excluding dependents).
Keep in mind that a full-time equivalent employee is defined by the IRS as multiple employees who are not full-time employees individually, but whose hours equate to a full-time employee when combined — and a full-time employee works at least 130 hours within a calendar month.
If your small business makes qualified donations to charitable organizations, they may be tax deductible, according to the IRS. Not only does this include cash donations, but businesses may also be able to deduct the fair market value of property donations as well.
If your business invested in certain types of energy-saving equipment, you may be able to deduct the expenses on your taxes, according to Energy.gov. Examples may include heating or cooling systems, solar lighting or a solar water heater. The Energy.gov website notes specific qualifications, so be sure to check with your tax advisor to see if any of your energy-efficient upgrades qualify.
Accommodations for Qualified Employees
If your business invested in ways to provide access to people with disabilities, you may be eligible to claim a tax credit if you meet certain qualifications, says the IRS. Credits may also be available if your business hired people with disabilities or removed barriers that previously prohibited their ease of mobility. Additionally, if your business employs veterans, you may be able to claim the Work Opportunity Credit, says the IRS.
By putting in time and effort now, you can find out if your small business may be able to benefit from tax breaks. If you think your business qualifies for any tax credits, be sure to consult your tax advisor to see if you can take advantage of the deductions.
The brief discussion of taxes on this page may not be complete or current. The laws and regulations are complex and subject to change. For complete details, consult your attorney or tax advisor.