Small businesses have a lot to gain by understanding their tax deductions. As an entrepreneur, you’re probably focused on growing your business and might not have time to learn about the various deductions you're entitled to.
In this blog, we’ll cover the 8 most common tax deductions for small businesses. Know what each deduction is and how you can take advantage of it. Let’s look at the 8 tax deductions.
One of the most common deductions is for inventory. You can deduct the cost of the inventory that you have on hand at the end of the year. This includes the cost of materials, labor, and overhead.
Be sure to keep track of your inventory throughout the year, and make sure you have all the documentation to support your deduction.
You can deduct the cost of utilities for your business from your taxable income. This includes water, electricity, and gas.
But you need to keep track of all of your expenses, make sure to use a cloud-based accounting software, so that there is no hassle of keeping a record of all the receipts. So if you’re ever audited in future, you’ll be able to easily provide proof of your expenses.
Make sure you stay on top of your bookkeeping and keep good records!
Business Property Rent
You probably know that you can claim certain expenses as tax deductions, but did you know that rent on business property is also tax deductible? If you're renting office space or warehouse space, that rent is tax deductible.
This is a great deduction to take advantage of, especially if you're a small business owner who's tight on cash. Just make sure you have all the receipts and documentation to back up your claims. And always speak to an accountant about what deductions are available to you.
Office supplies like boxes, pens, staples, paper, even though they are small, are all costs (which you can deduct from your taxes).
Advertising and Marketing
One of the deductions you can claim is for advertising and marketing expenses. This includes things like printing flyers and brochures, advertising in newspapers and online, and hiring a PR firm.
As long as you can justify the expense (i.e., it's related to generating revenue for your business), you can claim it as a deduction. And that can save you some big amount at tax time.
Travel expenses are one of the most common tax deductions for small businesses. This includes expenses such as airfare, hotel, and car rental. If you're traveling for business, make sure to keep your receipts and submit them with your tax return.
You know those interest rates on your credit card are high? Well, that's because the government wants you to pay them. But when it comes to small businesses, the government is a little more forgiving. In fact, they offer a range of tax deductions for small businesses that take out loans to finance their operations.
And here's the best part— you can claim these deductions whether you're a proprietor or a partnership firm. So if you're looking to take out a loan to expand your business, make sure you keep these deductions in mind.
When you make a loan to someone and that person doesn't repay it, you can claim the amount you lent as a deduction. This is known as a non-business bad debt.
There are a few stipulations, of course. The debt has to be bonafide, meaning it's really owed to you and not just written off as a loss. And the debtor has to be totally insolvent, meaning they can't repay any of their debts.
If all those boxes are checked, you can write off the amount you lent as a business expense.
As a small business owner, it's important to be aware of the top 8 tax deductions you can claim on your income tax return. By claiming these deductions, you can reduce your taxable income and save money on your taxes.
Claiming tax deductions is one of the best ways to reduce your taxable income and save money on your taxes. Be sure to track your expenses with the best accounting software in India or speak with an accountant to make sure you're claiming the right deductions.