10 Tax Deductions Small Business Owners Often Miss

Tax season doesn't have to be painful. Many small business owners leave money on the table by missing legitimate deductions. Here are 10 often-overlooked tax deductions that could save you thousands.

1. Home Office Deduction

If you use part of your home exclusively for business, you can deduct a portion of your home expenses. This includes rent/mortgage, utilities, insurance, and maintenance. You can use the simplified method ($5 per square foot, up to 300 sq ft) or calculate actual expenses.

2. Vehicle Expenses

Track your business mileage! You can deduct either actual vehicle expenses or use the standard mileage rate (65.5 cents per mile for 2023). Don't forget parking fees and tolls. Apps like PocketBoss make mileage tracking automatic and IRS-compliant.

3. Professional Development

Courses, workshops, conferences, and industry publications that help you improve your business skills are deductible. This includes online courses, certification programs, and professional memberships.

4. Business Insurance

All business insurance premiums are deductible, including general liability, professional liability, commercial auto, and business property insurance.

5. Retirement Contributions

Contributions to SEP-IRAs, SIMPLE IRAs, or solo 401(k)s are deductible. You can contribute up to 25% of your self-employment income to a SEP-IRA.

6. Startup Costs

You can deduct up to $5,000 in startup costs and $5,000 in organizational costs in your first year. Remaining costs are amortized over 15 years.

7. Bad Debts

If clients don't pay their invoices and you've made reasonable attempts to collect, you can write off bad debts. Keep documentation of your collection efforts.

8. Bank and Credit Card Fees

Annual fees, transaction fees, and interest on business credit cards are deductible. Keep business and personal accounts separate for easier tracking.

9. Phone and Internet

If you use your phone or internet for business, deduct the business percentage. If you have a dedicated business line, it's 100% deductible.

10. Depreciation

Major equipment and property purchases can be depreciated over time. Section 179 allows you to deduct the full cost of qualifying equipment in the year of purchase, up to $1,160,000 for 2023.

Conclusion

These deductions can add up to significant tax savings. Keep detailed records, save receipts, and consider working with a tax professional to ensure you're taking advantage of all available deductions. Remember, legitimate business expenses that help you earn income are generally deductible.