Don’t Neglect These Business Deductions That Equate to Big Income Tax Savings

Posted on February 16, 2016

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Top Missed Deductions That Could Affect Your Income Tax Savings

income tax savingsYou’ve carefully filed away your receipts, kept your business checking account separate from your personal funds and diligently filed your sales tax returns on time. If you’ve managed to avoid many of these accounting pitfalls that often plague business owners, congratulations. However, take time to consider your business deductions, to make sure you are capturing all of your possible income tax savings.

Here are some of the most commonly-missed deductions that deprive business owners of income tax savings on their return:

Home office expenses: If you have a portion of your home set aside exclusively as an office, you may qualify for a deduction for home office expenses. A portion of your utilities, plus a depreciation allowance can add up to a significant deduction on your return, so check to see if you qualify.

Vehicle expenses: If you travel for business, and you own or lease that car or truck, you may qualify for a deduction for vehicle expenses based on business use, including a portion of oil and gas, too. However, keep in mind that there is a limit on the amount of depreciation you can take for business vehicle expenses, called the “luxury car rules.”

Section 179 deduction: If you use a regular depreciation schedule, it could take years to regain the cost of a major purchase for your business. However, under the provision of Section 179, you can deduct the total cost of machinery purchased placed in service during the year, up to $500,000. Be sure to ask your accountant whether you should opt for the Section 179 deduction or use a depreciation schedule.

Travel and entertainment: If you travel for business, you may be able to deduct expenses like hotel and plane fare from your return. Also, if you entertain a client while on your trip, you can deduct 50 percent of meals and entertainment on your return. However, all travel and entertainment deductions require that the primary purpose for the trip was business-related.

Health insurance premiums: You already know that you can deduct health insurance paid for your employees. However, did you know that you can also now deduct the premiums you pay for yourself, your spouse and dependents?

Retirement contributions: If you have a retirement savings plan set up for employees, to which you make a matching contribution, those funds are deductible on your tax return. If you aren’t currently offering this type of plan, talk with your accountant to find out how the introduction of a retirement savings plan could help your income tax bill.

To find out more about the income tax savings you may be missing on your business tax return, schedule an appointment with Bert Doerhoff, CPA at AccuBiz. Doerhoff and his team can help you determine the best strategies for reducing your taxable income this year, as well as incorporating plans to optimize your tax return for subsequent years.

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