First off the bat, what are deductions and what do they mean for your small business? When I hear about calculating my deductions I usually picture the image above. In reality though a deduction is an expense that is made on behalf of your business that can be subtracted from your taxable qualified business income. OK, so what does qualified mean? According to Cornell Law School, for any taxable year, the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer. Such term shall not include any qualified REIT (Real Estate Investment Trust) dividends, qualified cooperative dividends, or qualified publicly traded partnership income (26 U.S. Code 199A-C(1)).
They are much easier to find than that missing sock, I promise!
So what items can I as a small business owner deduct? The simple answer is a lot, the complex answer can be found on the IRS website here. I don’t know about you but legalese is not my strong suit so I’ll sum it up. Items that are deductible include any purchases that are necessary for your business to operate; stuff such as property rent, utilities, cleaning supplies, stationary, etc. What you might not realize though is that you can also deduct company vehicles and salary / wages paid to employees. A good list of the top 20 small business deductions can be found here at Small Biz Trends.
Just because you use it doesn’t mean it’s deductible. If you use the “company car” to get supplies once a week but you also take it out the other 6 days a week for personal stuff… chances are you can get in trouble with the IRS. A safer route would be to deduct the mileage of your supply run at 0.547 cents per mile (according to the IRS’s IR 2017/204 document). Your best bet on being safe about deductions is to check with your account manager!
If you have eeCPA helping you, your account manager can review your deductions and even suggest further deductions to help save you money. Plus if the IRS decides to audit your business you have eeCPA at your back. We have all documents organized and securely stored in our cloud portal which allows you to access your documents at any time.