Expenses can often make a difference in whether your business makes a net profit or net loss. They include everything from your rent to payrolls and advertising costs. They come as fixed and variable.
1. Common Business Expenses
Expenses vary by business, but here are the common ones.
➤ Rent ➤ Utilities ➤ Payroll ➤ Office equipment ➤ Marketing ➤ Taxes ➤ Loan and interest payments ➤ License and permit fees
Besides fixed and variable, there are also deductible and non-deductible expenses. Knowing which expenses you can deduct is essential when claiming tax deductions.
2. Business Deductions And Tax Tips
Some of the expenses you can fully or partially deduct are self-employment tax, home office expenses, meals, advertising, and rent. Meanwhile, non-deductible expenses include political contributions, fines, penalties, illegal activities, demolition expenses or losses, and lobbying expenses.
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One of the simplest ways to reduce your business’ tax expense is to ensure you’re claiming all of the tax deductions your business is eligible for. Although you should consult with your CPA or tax advisor before claiming a deduction, below is a list of a few tax-deductible expenses.
Advertising
If you hired someone to design the logo of your business, printed business cards or promotional brochures, purchased ad space in print or online, launched a new website, ran a social media campaign, or sponsored an event, the expense is 100% deductible. Just pay attention as this does not apply to lobbying or political campaigns.
Business meals
As a general rule, you can deduct 50% of qualifying food and beverage costs as long as the expense is necessary for your ordinary business activity, without being extravagant. However, meals provided at office parties are 100% deductible.
Home office expenses
You can qualify for this deduction if you regularly use your home for conducting your business operations. But this means your home office needs to have clear boundaries and for space not to be used for any other purpose. It also has to be your headquarters from which you run your business.
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Education
The expense of attending classes, seminars, webinars, and workshops will be fully deductible if they add value to the business and increase your expertise. It can also apply to books and transportation expenses to get to and back from classes.
Salaries and benefits
Salaries, benefits and even vacation time are generally tax-deductible, as long as the “employee” is not the sole proprietor, a partner, or an LLC member and the salary is reasonable and necessary. Needless to say, the services need to have been actually provided.
3. Money-Saving Tips for Your Small Business
If you want to build your business, you need to identify ways to cut costs and lower your overhead.
Compare prices of everything you have to buy
If your business is in a deregulated state, you have the power to choose your utility provider. This gives you the ability to compare providers and choose the cheapest rate, which could save your business a significant amount of money as it will also improve your negotiating position.
Outsource
In a small business, the cost of hiring employees can easily add up to become the biggest portion of a budget. Keep your full-time staff to a minimum and outsource what that they cannot cover. Your business will also benefit from more varied expertise.
Make your business greener
Going green will save you green. Besides being a smart PR move, it’s also a smart financial decision that will lower your utility bill, perhaps make you eligible for tax deductions and credits and it will certainly save you money over the long haul as it will make your business more sustainable.
Takeaway
No business can escape expenses. But, you can minimize them and one way is through tax deductions that will help you pay less tax. Make sure you review all of your expenses with an accountant on a yearly basis so you can take advantage of every deduction your business is eligible for.
