As a small business owner in Dallas, tax season likely stresses you out. Despite how organized or careful you try to be with bookkeeping and financial records, actually filing taxes often unveils unpleasant surprises - from higher tax bills than expected to alarming audit risks.
The culprit? Missed deductions. The intricate U.S. tax code creates abundant deduction opportunities for SMBs. But keeping up with legitimate write-offs within the limitations and documentation rules required feels daunting, especially while actually running your company.
That’s why Dallas accounting firm Quadri CPA PLLC put together this guide examining the 5 most commonly missed small business tax deductions along with expert tips to tap into those savings. Read on to uncover if you’ve been losing out each tax year and how to leverage these deductions to owes less going forward!
Providing quality health plans for your cherished employees should give your small business dual benefits - attracting/retaining talent NOW while reducing taxable income LATER.
Under Section 162, deductions for health insurance premiums paid for employees are allowed for:
Officers/Owners: Can deduct 100% of health premiums you pay out for yourself/other owners and dependents if following non-discrimination rules. Not all plans like HSA or Archer MSA's qualify, so consult the latest laws or an accounting advisor like Quadri CPA.
Employees: Small businesses can deduct 100% of premiums paid for employees’ health plans like PPO's, HMO's and FSA's. Certain rules exist around what’s considered employee-only coverage vs family plans, however.
Pro Tip: Report health insurance premium deductions properly under wages/salary sections. Don’t miss out by categorizing under miscellaneous deductions. Also set internal processes to easily track amounts paid for owners vs staff.
Offering retirement accounts like 401ks for your workforce provides that sought-after perk while building future loyalty through golden handcuffs. The IRS blesses these good deeds by making contributions 100% tax-deductible without limitations.
As a small business, you can legally deduct amounts contributed to the following types of retirement accounts benefitting employees:
401k Plans
SEP IRAs
SIMPLE plans
Profit Sharing Plans
Pro Tip: Consult an accounting advisor to determine which retirement plan makes most sense for your small business based on headcount, profit margins and growth plans. Enroll support setting up the optimal structure.
Remote work mushroomed over recent years, making properly tax deducting home office space increasingly beneficial for entrepreneurs and small business owners alike. As of the Tax Cuts and Jobs Act of 2017, home office deductions look different from decades past, but still provide lucrative savings.
You can now deduct 20% of your household utility bills like electricity, gas, water utilities and broadband internet if used for business alongside claiming home office square footage deductions based on a calculation of total home size vs workspace size. We won’t bore or confuse with all the nitty-gritty math here.
Pro Tip: Consult a tax expert like Quadri CPAs to ensure you don’t miss home office deductions by incorrectly structuring claims or missing utility bill considerations. Keep all utility bills and house/office size details handy.
Businesses that rely on vehicles from food delivery companies to contractors across Dallas often use vehicles to serve customers and complete projects. But besides the actual lease or purchase payments for company cars, related mileage can also be a substantial tax deduction.
Make sure to capture vehicle costs like gas, repairs, maintenance warranties, cleaning, insurance and annual licenses. Then use a mileage log to track business-related mileage driven in order to claim a certain amount per mile deductible based on annual IRS rates (currently $0.585 per mile).
Pro Tip: Maintain meticulous auto logs or use a mobile app to prove mileage driven for work purposes should the IRS ever request documentation. Consult experts to determine actual vehicle cost deductions vs mileage in order to leverage the optimal amount.
The laws changed recently around deductions related to meals, entertainment like sporting events and travel like flights/hotels. But substantial deductions remain if you follow limitations.
Companies can still deduct 100% of food/beverage expenses associated with travel or potential business relationships under the rules. The same goes for transportation needed to conduct meetings and trips contributing to company goals. Entertainment tickets must tie directly to furthering business goals but faces a 50% deductibility limit if passing those strict tests.
Pro Tip: Keep diligent receipts, details on parties involved, topics discussed and tie backs to how every trip or entertainment event directly benefited business purposes. Abiding by the strict documentation guidelines is key to qualifying for these deductions.
As this breakdown reveals, small business tax deductions extend way beyond merely writing off office supplies and utilities. Yet, actually realizing thousands saved each year requires expertise around current rules, limitations and proper recording.
Partner with Dallas tax specialists Quadri CPA PLLC. Our CPAs stay vigilant regarding the latest IRS codes and court precedents around write-offs. We’ll uncover deductions you’ve been missing – helping to retain more hard-earned income to fulfill goals and ambitions for your startup or SMB.