Make Business Tax Deductions Work for You

Small businesses never want to leave money on the table, whether negotiating a contract, setting prices, or filing taxes. That's why it's essential to understand what business deductions you're entitled to when filing your taxes. You probably know about some—office equipment and consulting fees, for example—but others are less obvious.

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Sandra Beckwith

Sandra Beckwith has been writing for traditional and online publications since she sold her first magazine article while still a journalism student. Her articles in business, consumer, trade, and custom magazines; in corporate, alumni, and nonprofit organization publications; and on websites and blogs help readers learn more about successful initiatives and interesting people, or about how to do something better, faster, or smarter.The author of three traditionally published nonfiction books and a past contributing editor of three trade journals, Beckwith writes frequently on small business, logistics, supply chain, and work-life balance topics.She is also a national and regional award-winning former publicist who teaches authors how to market their books. Her book marketing website, BuildBookBuzz.com, has been recognized for excellence by four organizations and is ranked in the top 10 globally for book marketing blogs. She has served on the board of directors of the American Society of Journalists and Authors, where she remains an active volunteer and member. She is also a member of the Association of Ghostwriters. Beckwith is a graduate of Utica College of Syracuse University, a past member of its Raymond Simon Institute board, and a recipient of its Outstanding Public Relations/Journalism Alumna Award. A resident of a sweet little Erie Canal village in Western New York, Beckwith listens to audiobooks every evening while walking along the canal's original towpath for exercise. Her hobbies include eating, sleeping, and spending time with friends and family—but not necessarily in that order.

1. Petty cash

"I thought I was pretty diligent in covering for deductions, especially since I consulted with a tax professional from the onset. But because of the nature of my business, he didn't suggest deductions for petty cash, and I didn't think I'd ever need them," says Jesse Silkoff, founder of MyRoofingPal.

As the business grew, though, Silkoff was spending more and more from petty cash for office supplies and morale boosters that included doughnuts, pizza, balloons, and birthday cake. By establishing a voucher system that allows the company to keep detailed records on how the monthly $200 petty cash is spent, Silkoff can now claim the expenses on the company's taxes.

2. Banking fees

Business account bank charges that include monthly maintenance, ATM, and transaction fees are business deductions.

"Depending on your bank, these little monthly charges can eat up a portion of your overall profit for the year. Writing them off on your taxes as a miscellaneous expense is just one way to recoup some of the costs," says Finder.com banking writer Cassidy Horton.

3. Healthcare insurance premiums

You can deduct insurance premiums for employees, yourself and covered family members, and Medicare Parts B and D plus supplemental insurance.

In addition to this, any contributions you make to employees' health savings accounts are deductible.

4. Certain utilities

Home-based self-employed media creatives such as publicists, writers, producers, and advertising professionals can deduct a portion of cable TV costs because they're required to keep tabs on trends.

"For freelancers, this can lead to savings of over 50% of the total cost of their cable bill for the year so it can make a real difference," says George Birrell, CPA.

Small business owners, in general, can also deduct their Internet costs, business phone line, and business mobile phone bill. "If you use your personal phone for business, you can deduct a portion of your phone bill depending on the percentage you use it for business versus personal use," says Michael Kern, a CPA and co-founder of KORE Talents Consulting.

5. Start-up expenses

The IRS allows you to deduct $5,000 in start-up expenses and $5,000 in organizational costs incurred before you officially opened your doors as long as those expenses are less than $50,000.

Start-up costs include those incurred creating an active business or investigating how you will create or acquire that business. Organizational costs include what you spend to form a corporation or partnership.

6. International travel using government per diem rates

Do you travel abroad for business? The U.S. State Department simplifies the meal and lodging expense deduction process by providing a per diem rate based on the city.

"I used to keep foreign currency receipts for every trip, then convert each one to U.S. dollars. It was a mess," says Kurt Perschke, owner of WebBabyShower. Thanks to a tip from his accountant, he now documents the cities and travel days, then uses the State Department's per-diem rates for the deductions. "I find they are much more than what I spend," he adds.

The best way to make sure you leverage all deductions available, including the more obvious ones, is to work with a professional. Your tax or accounting advisor will help your company get the most deductions while helping you avoid making costly do-it-yourself mistakes.