Raise your hand if you run a small business? Ok, great thanks for stopping by. Now, how many of you small business owners would like to save more money by reducing your tax burden. I’m raising my hand right now.
I am a small business owner. Actually, I’m a consultant, but it’s still a small business and I certainly need to save money any way I can do it.
I hate tax time just like most small business owners do. This is where you are penalized for your success. It seems like more and more of my money I earn is going to taxes and fees and licenses. That’s why I decided to write this post. I’ve been doing my own taxes for many years and I’ve leaned a few things about doing taxes for a small business. I’m going to give you 4 deductions your small business can take come tax time.
Home Office Deduction
Many small business owners keep a home office. For me, it’s where I do all of my business. My home office is tiny but every little bit helps. Some important tips, to get the most out of your home office deduction you should use your home office exclusively for your small business. Also, you can claim a percentage of your utilities and home mortgage interest. This is calculated by the ratio of your total square feet against your home office square feet.
This is one that is new to me. You can claim education expenses if the expense is to help you in your current work. Such as taking a certification class to help improve your skills you currently use or gain new skills to help you gain more clients. You can’t claim this expense if you are training for a new job. So, if you’re programmer and you take night classes to be a plumber you can’t deduct those expenses. I’ve been working towards getting my full Microsoft Certification and I am now thinking of taking an instructor led class considering I can deduct the cost.
I have three kids and this could be a big one for me. You can deduct the amount you pay your child to work for your business when the child is 17 or younger. To claim this deduction, your business must be operated as a sole proprietor or partnership. If it is a partnership, it must be a partnership between you and your spouse. So, not every small business owner can take this deduction but many can. For me, I had my son help me with some research for a new website I designed for a client. My son is only 11 but he could handle the task easily and it lets him make a little money and get a glimpse into my business. Now I can deduct that payment..every little bit helps.
So there you have three tax deductions for your small business. There are of course many other deductions for you to take. If you don’t feel comfortable doing your own taxes I recommend finding an independent tax specialist to help you out.
So, what’s your favorite tax deduction? Leave a comment below.