The Most Overlooked Tax Deductions: Insights from a Tax Accountant’s Desk
Businesses are painstakingly arranging their financial records to reduce their tax burden and maximize their deductions. Even though most business owners know the most typical tax deductions for Tulsa business tax preparation, several write-offs may affect their profits, which they aren’t taking advantage of. After defining tax credits and explaining a tax deduction, we’ll review some deductions businesses should be aware of but seldom use.
What is a Tax Deduction?
Lower the amount of money you must pay in taxes by deducting certain expenses from your taxable income. A company’s tax liability may be reduced by deducting certain taxable income deductions. Companies rely on deductions to minimize their tax obligations and maximize their available funds.
The Most Overlooked Tax Deductions
1. Startup Costs
Many would-be company owners shell out cash before opening their doors, but they either don’t keep track of their spending or are unaware that they may claim these expenses as business expenses.
2. Taxes, Interest, Fees, Charitable Contributions
It’s easy to forget tiny sums spread out among many accounts while filing taxes, such as business-related credit card interest, bank fees, charity donations, and taxes. But remember that they may add up.
3. Wages and Payroll Taxes
Paying oneself a salary rather than receiving distributions may allow you to avoid paying self-employment taxes and take advantage of payroll deductions, but this depends on the form of your organization.
4. Travel Expenses
Travel expenditures for local excursions are sometimes overlooked, even though business trips are often deductible—meetings with customers and suppliers or running errands for business all fall under this category.
5. Bad Debts
If you can’t be paid for the items or services you offered, you may be able to write off bad debt as a company loss.
6. Health Insurance Premiums
If you operate a small company and do not have health insurance through your job, you may deduct the premiums for you, your spouse, and any dependents you have.
7. Education and Training
You may deduct a portion of or all the money your workers spend on formal education and training that improves their abilities. One way to provide competitive benefits while lowering your tax bill is to take advantage of programs like the American Opportunity Tax Credit, which lets you deduct a percentage of an employee’s tuition costs. If your firm benefits from your education and training, you may also deduct some costs for yourself.
8. Marketing and Advertising
Likely, you’re not surprised by this one. Grow your clientele and reduce costs by deducting your marketing and advertising expenses. However, one option you may not have thought about is advertising via team or event sponsorship. You should see an accountant for guidance on this one because of how complex it is; still, you may be able to deduct some or all of it.
9. Depreciation of Business Assets
Corporations often disregarded depreciation for intangible assets like software, copyrights, and patents, in contrast to physical assets like automobiles and equipment, which are well known to be eligible for deductions.
10. Employee Benefit Programs
Businesses may claim a tax break for contributions to employee benefit programs, including retirement plans, health savings accounts (HSAs), and flexible spending accounts (FSAs). Gym memberships and employee appreciation programs are perks and incentives that may be eligible for tax deductions.
Keeping accurate records and being abreast of tax law changes are the two most important things you can do to maximize your tax benefits. Working with a reliable CPA firm can put your mind at ease, knowing that you are maximizing all tax deductions and setting your company up for success.