As a small business owner, keeping track of expenses is crucial to the success of your business. However, navigating the world of business expenses can be confusing, especially when it comes to figuring out which expenses qualify as tax deductible business expenses. In this article, we’ll dive deep into the world of deductible business expenses to help you understand what you can and cannot claim as a deduction on your taxes.
Tax Deductible Business Expenses:
The IRS allows you to deduct certain expenses incurred while running your business, as long as they are considered ordinary and necessary. Below are a few examples.
Equipment and Supplies:
Expenses for equipment and supplies used in your business can be fully deductible in the year they are purchased, or depreciated over a period of time. This includes items like computers, office furniture, and raw materials.
Rent:
If you rent a space for your business, the cost of rent is generally deductible. This includes rent for office space, storage space, and even equipment rental. Work from home? Check out the IRS rules on home office deductions.
Advertising:
Advertising costs are deductible, including the cost of creating and placing ads in newspapers, magazines, or online. This also includes costs for flyers, business cards, and other promotional materials.
Travel:
Travel expenses for business purposes can be deductible, including airfare, hotel stays, meals, and transportation costs. However, it’s important to note that travel expenses are only deductible if they are directly related to your business.
Employee Benefits:
Expenses for employee benefits, such as health insurance, are deductible. This includes any contributions you make to an employee’s health savings account.
Legal and Professional Fees:
Expenses for legal and professional fees, such as tax preparation, accounting, and legal fees, are deductible. This includes fees for consultants, accountants, and lawyers who provide services related to your business.
Non-Deductible Expenses:
It’s also important to understand what expenses are not deductible for tax purposes. Non-deductible business expenses are any expenses that do not meet the IRS criteria above. Some examples of non-deductible business expenses include political contributions, fines and penalties, and expenses incurred for illegal activities. Additionally, personal expenses such as commuting costs or clothing worn for both personal and business use are not deductible. It is crucial for small business owners in Minnesota to accurately track and categorize their expenses to ensure that they are only claiming deductions that are eligible under IRS guidelines. Failure to do so can result in significant penalties and interest charges.
Working with Haworth & Company, Ltd.:
At Haworth & Company, Ltd., we specialize in helping small business owners navigate the complex world of business expenses and taxes. Our team of expert accountants and tax professionals can help you understand which expenses are deductible and ensure that you’re taking advantage of all the deductions available to you. Contact us today to schedule a consultation and take the first step towards maximizing your business’s deductions.
