Small-Business Tax Deductions Checklist

    

Small-Business Tax Deductions Checklist | EP Wealth Advisors

As a small-business owner who works hard and plays by the rules, you want to pay Uncle Sam everything you owe in taxes—but not a penny more. To that end, you may already take advantage of some tax deductions that may lower your tax obligations by writing off wages, supply costs, rent, and utility expenses, among other things.

But could there be more deductions available? 

If you are not working with a tax professional and assessing all of your potential deductions, you might be paying more in taxes than you’re required to pay—and keeping that much less of your hard-earned money because of it. With that in mind, let’s take a look at some under-the-radar tax deductions that you might find helpful.

6 Popular Tax Deductions for Small Businesses

1. Car and truck expenses

If you drive for business purposes—whether that’s going to a conference 200 miles away or driving from appointment to appointment in town—you may be able to write off mileage expenses. In 2019, you can write off up to 58 cents per mile for qualified business-related driving expenses, according to the IRS.

2. Depreciation expenses

If your business owns property, machinery, or equipment, you may be allowed to deduct depreciation expenses from your tax bill.

3. Home office expenses

If you conduct most of your business from the comfort of your home—and in a dedicated office, not from your bed—you may be able to deduct home office expenses, too.

4. Insurance

There may also be a number of insurance deductions you could take as well. For example, things such as health insurance, workers’ compensation insurance, life insurance, unemployment insurance, and liability insurance may all qualify.

5. Meals

The IRS also lets you deduct up to 50 percent of your business meal expenses if you or an employee is present and you are not buying food or beverages that are “considered lavish or extravagant.” Meals need to be shared with a “current or potential business customer, client, consultant or similar business contact.”

6. Qualified business income deduction

Beginning in 2018, the IRS has allowed small-business owners to deduct up to 20 percent of their qualified business income (QBI) earned “from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate.” For more information, check this out.

Corporate Retirement Plans

Another way small-business owners may be able to lower their tax obligations is by setting up a corporate retirement plan. In fact, corporate retirement plans are one of the most overlooked areas where small businesses can potentially lower their tax obligations.

For example, if you own a pass-through entity (e.g., a limited liability company), you may want to look into maxing out your health savings accounts (HSAs) and individual retirement accounts (IRAs) every year. That way, you’ll be saving for future medical expenses and your retirement while reducing your Adjustable Gross Income (AGI).

You may also want to look into pairing a defined benefit plan with a defined contribution plan (often referred to as a DB/DC combo). This enables you to set aside pretax dollars in a standard 401(k) plan augmented with a pension for executive leadership.

Similarly, if you’re a freelancer or “solopreneur,” a plan such as a Simplified Employee Pension (SEP) IRA might make sense. Whereas the current maximum annual contribution to a traditional or Roth IRA is $6,000 ($7,000 if you are 50 or older), you can put up to 25 percent of your net income (up to a maximum of $55,000) into a SEP IRA.

Bottom line? Business taxes and retirement plans are complex, to say the least. 

Partnering with a tax professional who knows the ins and outs of these convoluted and ever-changing laws can help you make an informed decision as you begin to plan.

Are you ready to start building a financial strategy as a small-business owner?

Most people don’t want to pay any more taxes than they need to. If you’re the rare breed who wishes to pay more, you can actually send a monetary gift directly to the government.

Because you’re reading these words, we’re guessing you are keen on maximizing deductible opportunities and possibly lowering your tax burden. But you might be a bit unsure of exactly how you can do that.

After all, the needs of every business are different, and every small-business owner has a unique financial situation, too. As such, you might not be able to take advantage of every deduction discussed in this article.

For the best results, consult with a tax professional.

EP Wealth Advisors - We’re Here to Help Small Business Owners

EP Wealth Advisors has the ability to integrate your business and personal finances and look at the complete picture to see what deductions are available to you.

We’ll work with you to build a tax plan that supports your financial goals. To learn more about how EP Wealth Advisors can help you build a plan that works for you, contact an advisor today.  

Disclosures:

  • EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented here. 

  • Hiring and/or working with a qualified financial advisor and/or financial planner does not guarantee investment success and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied results or projections being represented here will be met or sustained.

  • Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions with the appropriate professional. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. 

  • The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors.  Before making any decision or taking any action, you should consult with a professional advisor who has been provided with all pertinent facts relevant to your particular situation.

  • This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.

  • Retirement Plans are complex and require the assistance of a Third-Party Administrator, Record-Keeper and/or other professionals. Establishing a Retirement Plan and what type of plan, if any at all, requires comprehensive analysis of your business by qualified professionals. This document is not intended to be viewed as a comprehensive detailing of all retirement plans, accounts or options. Other options may be available that are more suitable to your specific needs.   

  • EP Wealth Advisors, LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”).  Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that EP Wealth Advisors LLC has attained a certain level of skill or ability

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