Many small businesses dread filing their quarterly taxes, but deductions help owners lower their tax burden. In addition to the standard deductions that most businesses take, there are lesser-known write-offs that can reduce tax bills even further.
1. Home Office
If you run your business out of a dedicated home office, you may be able to take the home office deduction. The catch with this deduction is that the space must be used exclusively for business purposes.
There are two ways to deduct a home office:
- Deduct actual expenses. You’ll need to have records for the cost of painting, repairs, utilities, rent, insurance and other expenses you want to write-off.
- Take the simplified deduction, which the IRS calculates by multiplying $5 per square foot of your home used for business. The maximum deduction is $1,500.
2. Contracted Workers
It’s not uncommon for small businesses to use independent contractors to take care of certain tasks throughout the year. Contracted workers are not employees, so you have less responsibilities as a business owner.
The cost of contracted labor is deductible, which will lower your tax burden.
To take advantage of this deduction, you’ll need to file a 1099-MISC to any contractor who received $600 or more from your business.
3. Janitorial Services
If you run your business from an office or you run a retail store, you may hire a janitorial service to keep your workplace clean. Cleaning services may be tax deductible, especially if the service is considered “necessary.” Many businesses can justify the need for a clean working environment, but in certain industries, cleanliness is a requirement.
4. Guard Dogs
If your business has a dedicated guard dog watching over your storefront or merchandise, you may be able to write-off the expenses associated with his care. This can include adoption fees, veterinarian bills, grooming, food and water.
Keep in mind that this deduction only applies to dedicated guard dogs. It does not apply to personal pets that you bring to work on occasion.
5. Music Equipment
Many businesses use music to improve employee productivity or create a more creative, calming atmosphere. If music is an essential component of the workplace, you may be able to deduct these expenses.
These expenses may include streaming music subscriptions, headphones, speakers and other musical equipment.
6. Customer Gifts
If you provide gifts to customers for promotional or thank-you purposes, you may be able to deduct these expenses. Businesses can deduct up to $25 per gift, and the gift must have a value of more than $4. Gifts given to family members can also be deducted if you have an independent business connection with the person.
The gift may not have your name imprinted on it, and it may not be one of a number of identical items that you intend to use for distribution.
7. Conventions and Trade Shows
The cost of traveling to and attending trade shows and conventions can be deducted if needed for employee development, marketing or other business-related purpose.
To deduct these expenses, you’ll need to keep records of all related expenses. Some webinars and local seminars may be deductible. Check with your tax professional to see if you can deduct these expenses.