What Small Businesses Owners Need to Know to Maximize Returns
Tax season can be a very hectic time for small and midsized businesses. Business owners tend to spend most of the year generating sales, building new products or services and keeping their customers happy. There are a few top tax deductions small business owners often overlook that will help them maximize deductions when it comes time to file.
Mortgage Loan Interest Deduction
Many business owners find that owning property like an office or a warehouse increases the value of the business. What they might not have realized is that mortgage loan interest for a business owner is fully deductible and is not capped. Interest expenses for personal loans are not deductible. If there is a loan for mixed business and personal expenses, the business may deduct the portion that is used for business purposes. Small businesses looking to use this deduction should be ready to provide the IRS with proof of the intent to repay the debt and a true debtor-creditor relationship.
Home Office Deduction
For those small businesses still getting off the ground, it’s possible to apply a deduction for home offices. There are two cases requirements that need to be met for an individual to use the home office deduction. First, the area of the home must be used as regular and exclusive use. For instance, if there is an extra room in the house that is only used for business then it meets regular and exclusive use. Second, the area must be the principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.
Equipment and Software Deductions
This tax deduction for small businesses is an allowance for the cost of buying property for your business. Section 179 of the IRS tax code allows a business to deduct the full purchase price of qualifying equipment or software purchased or financed during the year, up to $2 million. To take the deduction for the 2017 tax year, the equipment or software must be purchased and put into place before within the calendar year.
By keeping in mind simple tax deductions, business owners can reduce their tax liability and hopefully blood pressure during tax time. Be sure to consult a tax accountant or CPA before taking these deductions to prevent errors or misstatements.
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