Small Business Tax Deductions Worksheet (Part 2)
June 9th, 2020 | Small Business Resources
We spent a lot of time on what business expenses are deductible (which was fair enough, since you want to pay the least amount of taxes and get the most money returned). Today we’re going to get into the rest of our list of deductions.
Let’s talk about write-offs!
Disclaimer: This post is intended to provide generalized information designed to educate a broad segment of the public. It’s not personalized tax, investment, legal, or other business and professional advice. If you have questions, talk to a qualified professional.
Included in this post:
- Much of the information about how business tax deductions work is outdated
- What can small business write off in 2020?
- How Neat can help you
Much of the information about how business tax deductions work is outdated
It’s important for small business owners to be careful where they get their advice.
Recent changes to the tax code have made a lot of the information online about small business tax deductions obsolete.
The Tax Cuts and Jobs Act (TCJA) made changes to deductions, depreciation, expensing, tax credits and other tax items affecting businesses. For example, the TCJA established new rules for meals and entertainment expenses.
What can small businesses write off in 2020?
If you’re a sole proprietor, or your business is organized as a partnership or limited liability company (LLCs), here’s a list of tax write-offs you may be able to claim.
- Education — You can deduct the cost of newspapers and magazine subscriptions, seminars, continuing education, workshops, business conferences, classes, books, or anything else designed to improve your skills in your field.
- Advertising and marketing — Make sure you keep the receipts and details about your advertising and marketing expenses organized because they are 100% deductible.
- Computers and tech supplies — Because of the Tax Cuts and Jobs Act, computers aren’t considered listed property anymore. That means you can use bonus depreciation or potentially deduct the entire cost in a single year.
- Cleaning and janitorial expenses — If cleaning expenses are ordinary and necessary for your business, you can write-off cleaning supplies or the cost of hiring a cleaning service.
- Moving expenses — You can deduct the cost of moving business equipment, supplies, and inventory from one business location to another. The costs associated with the purchase or renting of a new location are deductible business expenses as well.
- Intangibles like licenses, trademarks, and other intellectual property — You can deduct certain intangible assets but the IRS regulations are complex. IRS Publication 535 Business Expenses offers guidance on which types of intangible assets you can deduct. Your tax professional can help you correctly handle items like these on your business tax return .
- Business meals — The changes wrought by the TCJA allow small business owners to deduct 50% of client-related business meals when they meet certain requirements. For example, food or beverages purchased at or during an entertainment event have to be paid for separately from the entertainment, or the cost of the food and beverages must be documented separately from the entertainment’s cost.
- Legal and professional fees — You can deduct professional service fees necessary to the functioning of your business. This includes legal, accounting, and bookkeeping services. If you use a software that is necessary to carry on your trade or business (like accounting software), you can deduct that too.
- Business association membership dues — The IRS allows you to deduct membership dues for your chamber of commerce, trade associations, civic or public service organization, professional organizations, or real estate boards. Typically, dues are non-deductible if the primary purpose of the organization is to provide entertainment or access to entertainment facilities.
- Cafeteria health-insurance plan (requires plan) — If you offer a Section 125 Cafeteria Plan — an employer-sponsored benefits plan that allows your employees to pay for certain qualified medical expenses with pre-tax income — you can lower your FICA, FUTA, SUTA, and Workers’ Compensation costs.
- Charitable deductions made for a business purpose –Although it’s still possible to deduct some expenses related to charitable acts, the Tax Cuts and Job Act of 2017 made it more difficult to claim tax deductions for charitable giving. Now, you can only deduct cash gifts, gifts of property or equipment, and travel expenses you accrue when helping a charitable organization.
- Consulting fees — In most cases, any consulting fees you’ve paid out are fully deductible.
- Conventions and trade shows — You can deduct registration fees, airfare, hotel reservations, and other expenses associated with attending conferences, conventions, and trade shows.
- Discounts to customers — If you’ve offered discounts to your customers, you may be able to write-off the expense.
- Equipment repairs — According to the IRS, “election to capitalize repair and maintenance costs are deductible.”
- Exhibits for publicity — These are considered advertising business expenses and are fully deductible.
- Freight or shipping costs — Shipping costs you incur for business purposes are deductible including stamps, UPS, and FedEx shipments.
- Gifts for customers or employees — You can write off gifts for your customers or employees as long as you observe the $25 deduction limit for each gift.
- Guard dog — If having a guard dog to protect your business is a reasonable and necessary expense, you can deduct the expenses — including vet bills, food and toys — on your business tax return.
- Gym for employees, located onsite — You can take a tax deduction for the costs of your employees’ gym memberships if you offer them on-site.
- Insurance premiums for credit, liability, malpractice, worker’s comp, and other insurance — These expenses are all deductible with proper documentation.
- Management fees — In most cases, you can take a deduction for the full amount of a business expense as long as it meets the criteria of ordinary and necessary and it isn’t a capital expense.
- Medical and dental expenses (with plan) — You can deduct the amount of your medical and dental expenses that exceeds 10% of your adjusted is deductible as income (AGI).
- Prizes for contests — You can deduct the cost of gift cards, prizes, and promotional items used in contests.
- Royalties — If your company pays royalties, the IRS allows you to deduct those royalty payments. Of course, this reduces your taxable income for federal tax purposes.
- Safe-deposit box — You can deduct the expense of renting a safe deposit box used to store stocks, bonds, or investment-related documents.
- A safe — You can also deduct the cost of a safe used for business purposes.
- Business travel — You can deduct plane tickets, hotels, train tickets, rental cars, and taxis (that includes Uber!), and Airbnbs used for business travel.
- Storage rental — If the expense is ordinary and necessary, you can deduct storage rental fees.
- Providing meals or entertainment to the general public to promote goodwill — You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. The 50% limit doesn’t apply to this expense.
How Neat can help you
As you’ve seen, taking advantage of small business tax deductions can help you pay the least amount of taxes and get the most money returned.
Unfortunately, there’s no master list in the Internal Revenue Code that details what you can deduct and what you can’t. There’s only Code Section 62, which says any expense incurred in the production of income is a valid write-off. Because each deduction has its own rules, it’s best to speak with a tax professional.
Here’s how Neat can help you prepare your small business taxes:
Simplify Tax Preparation — Neat helps you manage documents, categorize expenses, and quickly reconcile accounts for easy tax filing.
Easily Communicate With Your Accountant — Tired of long email chains? You can send items to your accountant or tax preparer straight from Neat. Every item and folder in Neat also allows you to add and receive comments, making collaboration a breeze.
File Your Taxes Quickly (And Accurately) — Easily send expenses to your tax or accounting software. Map expenses a single time to match your QuickBooks preferences, and incoming data will be automatically coded. Export tax categories, expenses, and document images to tax software like TurboTax to eliminate the need to type in data. Our tax solution tags expenses and retains records to maximize deductions and audit-proof your business.
Want to see how to maximize deductions and audit-proof your business? Try Neat free for 15 days! Cancel anytime.
March 31st, 2022
June 26th, 2020