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The Ultimate Business Deductions in 2022: What You Need to Know as a Small Business Owner

Did you hear? It’s National Small Business Week!

So, in honor of this week, we'd like to offer reliable tips and information designed for you to maximize your ultimate business tax deductions now.

A solid tax deduction can reduce your business tax bill incredibly.

There's a lot of information out there about tax deductions, but some of it is outdated – here’s the bee’s knees on your ultimate business tax deductions to keep in mind for 2022.

Discounted or Free Products & Services

As a small business owner, you can still benefit from any discounts or freebies that make it to your customer.

This includes:

  • Giving away products

  • Supplying samples

  • Client appreciation activities

  • Providing charitable services to your community

  • Presenting gift cards or coupons to clients

To illustrate the tax savings: If a skincare business gives 10% off on any orders over $100 and they sell 100 units at that price point this year, then their deduction would be $10,000. If their gross profit margin is 50%, then they would end up paying $15k less in taxes, thanks to those sales!

Business Meals

For 2021 and 2022 only, businesses can deduct 100% of business-related food and beverages purchased from a restaurant.

However, if you're entertaining that same client in-office with snacks purchased at a grocery store or gas station, the meal is 50% deductible. You must have receipts and can prove that the meeting was work-related.

There's an old joke about two businesspeople who want to deduct the cost of their dinner out.

"How's business?" one asks.

"Don't ask," is the reply.

So, they move on to talk about anything and everything else, confident that they've satisfied the requirements for a tax deduction.

Travel-Related Expenses

Travel expenses are 100% deductible.

Travel expenses include:

  • Plane, train, or bus tickets

  • Car rental or fares for taxis

  • Tips you pay

  • Lodging cost

  • Shipping of baggage or materials

What about all those business miles you are currently racking up during the year?

Be sure to keep a log of your mileage. Most businesses have a mileage log where they record how many miles, they drive each day and what tasks those miles were spent doing.

For example, if part of your job is delivering food orders through Uber Eats, you can list "food delivery" under purpose of trip (the reason why). The next time someone from Uber Eats asks about your income tax forms, show them this log, and explain that it's evidence that most of your driving was done for business purposes (and therefore deductible).

Your Home is Your Office

If your workspace is used exclusively for business purposes and is separate from living areas, then the IRS will consider it a legitimate home office.

Home office business deductions include:

  • Rent

  • Real estate taxes

  • Insurance

  • Mortgage interest

  • Utilities

You must use that space regularly as part of your work to claim the deductions on it. On other days of the week, that same room might serve another purpose (as a storage area or game room area) if it's not being used exclusively by family members or guests during those times when no clients come over.

For example, if you're a hair stylist who works from home two days a week and are using one room for your hair styling tasks only, then that would be eligible for the deduction.

Tools You Use to Do Your Work

Your business equipment is required to be used for your trade or business and not used for personal activities. You should deduct your tools the year you buy them. If the tools have a useful life of more than one year, you should depreciate them. You can usually depreciate tools over a seven-year recovery period.

Such as, a carpenter may need hammers, tape measures and a level. Because they represent an out-of-pocket expense, the carpenter can receive a tax benefit when filing their tax return.

The important takeaway here is to keep track of everything and know what benefits are available to you as a business owner. Tax deductions are a great way to save money on your taxes and get more out of your business expenses. If you want to maximize your deductions—and save as much money as possible—it’s important to keep track of all the things related to running your company during tax season so that they can be properly documented and filed with the IRS when the tax season rolls around again in 2023!

Keep in mind - this is just a brief overview of possible business deductions that you can take advantage of for your business. Tax laws change on a frequent basis and not all tax deductions will apply to every business. With the help of Tax Incorporated, our accountants can find even more deductions that are normally withheld or unexplored.

If you are a small business owner reading this, start preparing and planning for next tax season now with Tax Incorporated.

A part of our mission is to improve the understanding and experience of tax filing for all taxpayers.

Tax Incorporated can assist you to find applicable tax deductions, as well as verify other tax savings for your business.

Do you want more information on how we can assist your business?

Reach out to us. We'd be more than happy to assist you with any of your questions.

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