Tax season can be an opportunity for small business owners to uncover valuable savings. Knowing which deductions to claim can make a significant difference in your tax bill, freeing up resources to reinvest in your business. At Polaris Tax & Accounting, we specialize in helping small businesses identify all eligible deductions, maximizing their savings and simplifying tax filing. Here are some of the top deductions to keep in mind.

1. Home Office Deduction

If you operate your business from home, you may qualify for a home office deduction, allowing you to deduct expenses related to the portion of your home used exclusively for business.

  • What’s Deductible?: Mortgage interest, rent, utilities, insurance, and maintenance costs are among the expenses that can be partially deducted based on your office’s percentage of total home space.
  • Simplified Option: The IRS offers a simplified home office deduction, which allows $5 per square foot of office space, up to 300 square feet.

2. Business Meals

Meals with clients, potential clients, or business partners can be partially deductible, helping you recoup some costs of networking and client engagement.

  • Deduction Rate: Currently, 50% of qualifying business meal expenses are deductible.
  • Documentation: Keep receipts and note the purpose of each meal, including who attended and the business discussed, to ensure compliance.

3. Vehicle Expenses

If you use a vehicle for business purposes, you may be eligible to deduct vehicle-related expenses.

  • Standard Mileage vs. Actual Expenses: Choose between the standard mileage rate (58.5 cents per mile in 2022) or deducting actual expenses like gas, insurance, and repairs.
  • Documentation Tip: Maintain a mileage log or use an app to record business miles for accurate deductions.

4. Retirement Contributions

Contributing to a retirement plan is not only a smart financial move but can also reduce your taxable income.

  • Qualified Plans: Small business owners can establish SEP IRAs, SIMPLE IRAs, or Solo 401(k)s, all of which offer tax-deferred growth and potential deductions.
  • Contribution Limits: For SEP IRAs, you may contribute up to 25% of your net earnings from self-employment, up to a maximum of $61,000 in 2022.

5. Health Insurance Premiums

If you’re self-employed and pay for your own health insurance, you may qualify for a deduction on health insurance premiums.

  • Eligibility: This deduction is available if you are not eligible for an employer-sponsored health plan.
  • What’s Covered: Health, dental, and long-term care insurance premiums for yourself, your spouse, and dependents can be deducted.

6. Advertising and Marketing

Promotional expenses to grow your business are fully deductible, making it easier to invest in marketing.

  • What’s Deductible?: Website expenses, social media ads, print materials, and even costs associated with branded merchandise are all eligible.
  • Documentation: Retain receipts and invoices to substantiate your marketing expenses.

7. Professional Services and Software Subscriptions

Any professional fees or software necessary to run your business can be deducted, helping you cover the costs of growth and compliance.

  • Examples: Fees for accounting, legal, consulting services, and software subscriptions (e.g., project management, marketing tools) are deductible business expenses.
  • Tip: Polaris’s tax preparation and planning services are also deductible, as they are essential for keeping your business tax-compliant.

8. Depreciation of Business Assets

If your business owns assets like equipment, furniture, or real estate, you may be able to deduct depreciation.

  • Section 179 Deduction: This allows you to deduct the full purchase price of qualifying equipment in the year it was bought, up to certain limits.
  • Bonus Depreciation: You may also be eligible for bonus depreciation on qualified property, which allows for an additional first-year deduction.

Tax deductions can make a big difference in your tax liability, but it’s crucial to know which deductions apply to your business and how to claim them accurately. Polaris Tax & Accounting is here to help you navigate complex tax regulations and maximize your deductions with ease. Schedule your tax preparation consultation with Polaris today and let us help you uncover every potential saving for your business.