Tax Credits for Small Business Owners

Tax Credits for Small Business Owners

Small business owners enjoy a wide variety of tax credits and deductions that large corporations don’t. Before you leave money on the table this coming April 15, investigate your options, gather your records and make an appointment with a licensed tax professional.

The Home Office

The journey of finding tax credits for business owners begins in the home office. Although the Internal Revenue Service reviews these popular credits and deductions with a microscope, with accurate record-keeping you can reduce your tax bill significantly. Do you work from home? Do you use the Internet? Did you purchase new equipment? If the answer is yes, these expenses are all deductible.

Don’t forget to measure the square footage of your home office, because the proportional portion of your heat and electric bills are deductible as well. Sole proprietors, limited-liability owners and corporate officers are equally able to take advantage of these deductions.

SBA Recommendations

According to the Small Business Administration, oddball travel expenses, including the cost to launder your clothes while you are away, is fully deductible. Marketing expenses, education expenses, fees your business pays to operate a bank account and money you spend to pay healthcare premiums are all deductible. The mileage expense is another popular deduction, although the rules change frequently; update yourself before you file your return.

The SBA also notes that hiring a veteran reaps significant tax benefits as well, especially if the veteran has been out of work six months or longer.

Sole Proprietorships and Family

Sole proprietors enjoy a unique advantage among small business owners: the ability to employ family members and save on employment taxes up to $5,000 in income. For example, imagine your son works for you over the summer. You pay him $6,000. The first $5,000 is deductible from your income — a huge advantage.

Sole proprietors also enjoy tax savings on private health insurance premiums, which can add up to thousands of dollars quickly.

Retirement Benefits

Don’t forget that setting aside money for retirement offers one of the biggest tax advantages of all. Establishing a 401(k) allows small business owners to contribute up to $17,000 on a pretax basis in addition to 25 percent of net income.