Business Tax Deductions That Help Make Your Dreams a Reality

Business Tax Deductions

Are you fed up with your day job? Did you plan an epic escape from a lifetime as a retail, fast food, or as a corporate drone? One possible escape is to start your own business. (You can take a look at a few different types of business ventures here). Quitting your day job to become an entrepreneur is an exciting gamble. Success could lead you to become the head of the next Walmart or Amazon. Failure could lead to the business becoming one of the 50% of businesses that don’t make it past the 4 year mark.  But there are some business tax deductions  to ease your venture.

In order to combat the expenses that go into starting a business, business owners be aware of what business expenses they can write-off in their taxes. In order to help business owners manage the financial cost of entrepreneurship, the United States government has a pretty expansive list of expenses that can be deducted.

The overall guideline for all expenses is that it must be ordinary (common and accepted in the industry) and necessary (helpful to business). There are two types of ways to recover money through taxes, capital and deductible expenses. Long story short: deductible expenses can be fully deducted immediately, capital expenses are gradually recovered over time.

Here are a few examples of business deductible expenses.

Repairs to equipment or property.

Business owners can deduct any repairs to equipment or property that keep the asset in normal operating condition. Costs are not considered repairs if the addition improves the operating condition.

Repairs to business vehicle.

Repairs to vehicles can be deducted, but restoration and overhaul of business vehicles are considered capital expenses.

Maintenance to private road or driveway.

While building a driveway or updating a driveway ( changing a gravel driveway to concrete) are considered capital expenses, but simply maintaining a driveway (re-painting parking lines or filling in potholes) are tax deductible.

Interest from a business loan.

Interest can be deducted on a loan if the entirety of the money is spent on business expenses. If a portion of the money went to purchase personal expense, you can only deduct the business portion of the interest.

Business use of your home.

If you have a home office, you can deduct the mortgage interest, insurance, utilities, and repair costs associated with the home office. Deductions must be calculated to only cover the percentage of the house that the home office fills.

In order to qualify, the rooms used as a home office must be exclusively utilized as a home office and must either: be the principle place of business, a place where you meet clients, a separate structure that is not attached to the main part of your home.

Those are the main business tax deductions you should keep in mind. You can find a larger list of possible deductions to explore here. Just remember as you explore different deduction to ensure that the expenses are business related. Not strictly business related expenses could lead to an IRS audit where you will be taken to tax court and required to prove that the expense was business related.

Here are two non-traditional business tax deductions that were taken to court and the judge’s ruling. A junk yard owner successfully convinced a judge that the cat food he bought to attract stray cats was a business expense because the cats dealt with the pest problem in the junk yard.  On the other hand, a public accountant tried to deduct the advertising costs from retrofitting his yacht with branded a branded logo. Due to the fact that the accountant used the yacht for personal recreational trips, the deduction was denied.

Too many rejected business tax deductions and the business might find itself with more expenses than it was prepared to handle. While tax deductions can help businesses with the financial strain of starting a business, unmindful use of the system could lead to a long-term problems. If there is any question about whether an expense is tax deductible, you might want to seek guidance from a tax expert.

Photo Credit: Lending Memo

Samantha Stauf

Samantha Stauf graduated from the University of Idaho with a degree in technical writing. In the last year and a half, she has been working in the marketing department at a local start-up

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