If you’ve just started out as an entrepreneur, you may not realize all the benefits this affords you come tax time. These simple deductions can help you save big during tax season. Entrepreneurs are able to save as much as 35% on taxes if they know what to write off.
Reading up on every tax deduction will better prepare you to take advantage of these write-offs. Maximize your tax returns with the following credits and tax deductions:
1. Inventory Costs
One of the most obvious write-offs entrepreneurs can take advantage of is the cost of stocking their inventory. Whether you have an offline or online store, don’t forget to write off the cost of the inventory you’ve sold. Experts from Carina Advisors share that entrepreneurs only need to pay the taxes from their profits rather than the revenue the business generates.
2. Home Office Expenses
While some entrepreneurs do have a brick-and-mortar office location, this is hardly necessary to start your own company. if you’re one of the many entrepreneurs that work out of a home office, don’t forget to include home office-related expenses when filing your taxes. Just as choosing to work from home will cut the costs of having to rent an actual office space, you will also benefit by deducting the costs of operating your home office during tax time.
3. Cost of Utilities
Though many entrepreneurs accept that the cost of utilities is part of running a business, your utilities can pay for themselves if you remember to deduct them on your taxes. Just as an entrepreneur can write off a portion of their home office, they can also claim their utilities like plumbing, water, and electricity. For example, tax experts share that entrepreneurs with home offices that occupy 20% of the home can benefit from a 20% deduction for related utilities, repairs, homeowners association fees, and maintenance expenses. As these deductions add up, entrepreneurs often find that they save more than they did prior to starting a small business.
4. Cost of Business Insurance
Having to pay for insurance as an entrepreneur can seem like an unnecessary expense. However, during tax season, you can write off insurance costs. Even if you have a home office, part of your home insurance is likely tax-deductible. If you have additional insurance like liability coverage or malpractice coverage, you might be able to write off these premiums as well.
5. Freelancing Costs
As an entrepreneur, it’s likely that you’ve hired one or more freelancers to help alleviate the workload. If you’ve worked consistently with freelancers, you may be able to deduct this from your taxes. Freelancers that you’ve paid over $600 during the past tax year need a 1099-MISC form. Be sure to send these qualifying freelancers this form as it will enable you to write off their paychecks.
6. Expenses From Work-Related Trips
Don’t forget to include your work trip expenses when filing your taxes. Think about the times you’ve spent traveling for work in the past year. Expenses like food purchased for business-related purposes can be deducted. Additionally, the cost of gas, plane tickets, and similar transportation expenses can be deducted as well.
As you begin the process of filing your taxes, make sure you know what the IRS considers business travel. One detail that experts from Carina Advisors share is that in order for a trip to qualify as work-related, an individual must spend the night away from home.
Don’t miss out on the best tax returns for entrepreneurs. Keep this guide in mind as you complete your taxes before the April deadline