2021 Ultimate List of Small Business Tax Deductions

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With the year coming to an end, tax return season is just right around the corner. For small businesses, that means being prepared to find all of the small business tax deductions you can to minimize your payout to the IRS. 

Get prepared for tax season with these small business tax deductions that may apply to your business. 

Tax Dates

When filing taxes, knowing the deadlines is an essential part of being organized and prepared. Missing a deadline could result in paying interest on any amount due. 

Individual tax returns are due by April 18, 2022. However, when a filing extension is granted, the date is extended to October 15, 2022. This extension can increase the time you have to corral different small business tax deductions. 

For most small businesses, a quarterly filing is beneficial for keeping payouts spread out throughout the year. These quarterly due dates differ according to the types of filings. Note that small business tax deductions will also have to be calculated quarterly and not annually if you file quarterly. 

The first quarterly filing date for those filing a Form 1040-ES, the deadline to have them postmarked and submitted, is April 15, 2022. The second quarterly filing date for self-employed workers is June 15, 2022. Make sure all payments and forms are turned in by this day to avoid a penalty. 

The third quarterly filing date is September 15, 2022. This date is also the last one in the 2022 calendar year. The fourth quarterly filing date is January 15, 2023. While it is in 2023, it is the deadline for quarterly 2022 taxes to ensure all December 2022 taxes are included. It is also your last chance to claim small business tax deductions for the year. 

Deductions

Learning what deductions are and how they can help lower payouts is important for all business owners alike. Some of the common small business tax deductions include:

  • Office supplies and expenses
  • Rent
  • Family members’ wages
  • Advertising and marketing
  • Banking fees
  • Car expenses
  • Charitable deductions made for a business purpose
  • Charity or traveling to perform charitable services
  • Conventions and trade shows
  • Eating out while you’re traveling for business
  • Education and training for your employees
  • Employee benefits
  • Equipment
  • Equipment repairs

Let’s take a look at each of these small business tax deductions in depth.

Office Supplies and Expenses

There are many things to buy for a business startup in an office setting, from purchasing all new supplies to ordering more printer paper throughout the year. However, expenses and supplies are different things.

Typical office supplies are:

  • Paper
  • Pens, highlighters, and pencils
  • Toilet paper
  • Business cards
  • Furniture
  • Mailing supplies
  • Cleaning supplies
  • Staplers
  • Breakroom appliances
  • Drinks for employees

Common expenses include:

  • Software systems
  • Cleaning services
  • Computers
  • Smartphones
  • Cloud services
  • Website fees

Many people have questions regarding a home office deduction. So many people have been working from home during the Covid-19 pandemic, but only those who meet the  home office guidelines can include this expense in their small business tax deductions.

Mailing supplies may not fit into the office supplies category. If your small business sells homemade crafts and buys mailing envelopes to mail those crafts, that falls into a separate category for the cost of goods. Sending letters to customers or mailing a check to pay rent would be considered office supplies for small business tax deductions. 

Rent

Having a physical store or business and paying rent qualifies for a tax deduction. For many small business owners, rent is a rather large expense that you can write off. The exception to this is rent paid for a residential dwelling out of which you work. 

Family Members’ Wages

Having family members who work in your small business can be a great deduction, too. Minors who perform legitimate work for the business and are under 18 may be exempt from paying FICA. If the family member is under 21, you may be eligible to avoid paying FUTA for them. 

Spouses make great deductible employees as well, offering great health insurance exemptions. Having a dependent on your health insurance plan can be very costly, but employee’s plans are often much cheaper. The IRS also does not set a maximum on how much employers may pay for insurance plans.

Advertising and Marketing

Marketing and advertising are a huge part of getting the word out about your business. Many business owners set aside a large budgeted amount each year to go towards this expense. 

From social media platforms to signs and bus ads, all marketing and advertisements are tax-deductible. A few of the most common advertising expenses are social media campaigns, SEO services, email marketing, and promotional products.

When companies hand out t-shirts, pens, or any promotional products with their name or logo on them, this is considered to be a form of advertisement. These swag products are tax deductions as well as great tools for marketing.

Just as shipping products is considered to be a cost of goods, a website that sells your products is also deductible under that category. A website used solely to advertise your business is tax-deductible as an advertisement.

Banking Fees

When opening a new business, it’s a good idea to open separate bank accounts and credit cards for the company to differentiate its accounts from your accounts. 

The bank will likely charge annual fees, overdraft fees, interest, and processing charges. Many small businesses use Paypal, Square, or other services to take credit or debit card payments. These services typically charge service fees. All of these fees from financial institutions can be claimed as tax deductions. 

Car Expenses

Traveling for business is common for many company owners as they meet with clients, pick up office supplies, and keep their businesses running. When a personal vehicle is used for business purposes, this use can be deducted based on a mileage rate or actual expenses. 

Mileage rate deducting allows business owners to track how many miles have been driven for business purposes and multiply that by the average mileage deduction rate for that year. 

An actual expense method requires receipts of gas, all vehicle costs, including repairs, insurance, and registration payments, to be supplied and multiplied by the number of miles driven. It is best to choose the method that gives the greatest deduction. 

Charitable Deductions for Business Purposes

Many businesses make donations to charities in the form of physical goods donations or monetary donations. So long as these are given to qualifying charities, you can deduct these contributions. 

Keep receipts for any goods purchased for the charity as well as for cash donations. If a receipt is not available for cash donations, acknowledgment is needed if the gift is over $250 in one single offering.

Charity and Charitable Traveling 

For many businesses, charity work is a great way to give back to the community that they work hard to serve. Their volunteer time is valuable, as is the investment they make in traveling to these events. 

According to the IRS, travel and other out-of-pocket expenses not reimbursed by the charity are eligible for a deduction. These travel expenses include flights, gas, hotels away from home, and meals.

Conventions and Trade Shows

Trade shows and conventions are ultimately necessary for many artists and home-based small businesses to obtain customers and sales. These shows can get expensive paying for hotels, meals, booth fees, and other related expenses.

You can deduct these expenses from business taxes so long as they are necessary. Many of the common things businesses pay for at these shows include:

  • Registration fees
  • Supplies
  • Travel expenses
  • Hotels away from home
  • Marketing expenses

While these expenses add up, business owners can build them into substantial small business tax deductions.

Dining Expenses

Wining and dining clients is not a new practice for business owners. It’s a time to sit down for a meal and convince clients to choose your expertise or products for their business or personal use. 

These dining experiences must follow specific guidelines. They must be necessary and not outside of typical business arrangements. 

Rewarding workers for their hard work with a delicious delivery is also a tax-deductible situation. For those who throw office parties and have them catered, this expensive meal may qualify as a deduction. 

Education and Training 

Many businesses require employee training for OSHA safety, insurance license exams, and other certifications. 

Paying for employees’ training and education is not only a good incentive for workers to continue working for the business, but it also helps decrease money lost to taxes by increasing deductions. 

Employee Benefits

Many employee benefits can be costly for employers. Benefits are a good way to improve the quality of the workplace and increase staff morale. Health insurance is quite expensive for employers, but it greatly benefits the employees. Under certain guidelines, it may be tax-deductible. 

Other employee benefits include paid time off, vacation time, bonuses, retirement, and life insurance. 

Equipment

For a small business that creates custom T-shirts, equipment might include a heat press or a vinyl cutter. For a woodworking shop, equipment might consist of drills, a saw, and a nail gun. 

Equipment should not be confused with supplies, including T-shirts for the first company or nails, screws, and wood glue for the second company. Equipment deductions apply to any type of machinery, computers, or other items necessary to perform a business. These items will often depreciate with time.

Equipment Repairs

Equipment repairs are deductions that are separate from equipment purchases. Whenever a tech business needs a computer repair, this would fall under the equipment repair category.

Businesses that use large, heavy machinery that breaks down can use this deduction to deduct costs associated with repairing their equipment. 

Maximize Savings with Xendoo

Preparing taxes comes with many questions for those who don’t do it daily. It can lead to an immense amount of time browsing the IRS website to answer questions that a professional can answer in minutes. 

For small business owners, time is money. You could spend that time working on finding new customers and less time stressing over taxes. While having 2021 taxes prepared, Xendoo tax advisors can also look over previous years’ taxes to ensure accuracy. 

Organized Taxes

Don’t let the tax season be filled with chaos and questioning deadlines. Knowing someone else is taking care of the paperwork and checking off the list of things needing to be done can be a huge stress relief for business owners. 

Keeping all forms organized can help you find documents easier and turn in records on time. Missing a deadline can be an expensive mistake. Allow a tax prep professional to keep up with all of the small business tax deadlines.

There are many forms to file as well as keep up with. Instead of flipping through them all, trying to find the right one, or filling out unnecessary paperwork, use a checklist from Xendoo, so you know what you have to file.

The idea of facing an audit is stressful for many business owners. Be less likely to face an audit by having your taxes prepared by a professional. We will fill out the forms correctly and promptly. 

Access to Professionals

When questions arise concerning state and federal taxes or possible deductions, have a tax prep professional ready to help answer any questions. Our staff is certified by the IRS to perform tax preparation. Finding answers to questions regarding qualifications for deductions is simple for them. 

By taking advantage of the set rate for Xendoo services, business owners can ask questions without paying by the hour to an individual accountant. This approach can increase your savings dramatically. 

Affordability for Small Businesses

Instead of spending hundreds of dollars for an hourly CPA or bookkeeping service, save money with Xendoo with a set monthly rate. Xendoo offers both bookkeeping and tax preparation services for small business owners. 

Contact Xendoo Today

Tax season can be a stressful time for many businesses. There are so many deductions to keep in consideration that need to be filed under the right category. Know that your business tax returns are being handled properly and promptly with our tax services. 

Call Xendoo today to schedule a consultation with one of our professionals to prepare your tax preparation checklist for 2021.

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