With your TurboTax consultant, you will be able to identify as many tax breaks for your small business as possible and, in the process, enjoy higher savings. Keep in mind that the more tax deductions you can legitimately claim, the lower your taxable profit will be, and the higher your savings can be.
When your business is in operation, your operating expenses from manpower costs to office supplies, utilities, and advertising can obviously be deducted from your income. But capital expenses – the costs of getting your business started – can be deducted on the first year but up to $5,000 only. You can deduct the remaining capital expenses in equal amount over 15 years, which still represents savings for your business.
Your tax consultant will be able to discuss the complexities of auto expense deductions on a more detailed basis. Basically, you can deduct a few of the cost items related to keeping a business use car on the road, whether said car is your own personal car or a vehicle purchased specifically for the business.
If said car is being used for professional and personal purposes, you can only declare the business portion as tax deductions. You must then keep track of the frequency with which the car is being used for business purposes so that you can add it all up at the end of the year. You cannot claim 100 percent deduction for your personal car/business car for this reason.
You can claim deductions for auto expenses in one of two ways, namely:
- Actual expense method wherein you have to keep track and show proof of all the actual business-related auto expenses from fuel to repairs as well as depreciation on a new car
- Standard mileage rate method wherein only a certain amount is deducted for each mile driven in addition to parking fees and tolls, among others.
As a rule of thumb, you will enjoy higher deductions on the actual expense method assuming that you are using a newer car for business purposes. You can only apply the standard mileage rate method during the first year a car is used for business activity, among other provisions.
Other small business tax deductions include business books expenses, legal and professional fees, bad debts, business entertaining, travel costs, and interest and carrying charges on credits used in financing business purchases. You will find that with the assistance of your tax advisor, you will find many more possible tax breaks that will make running your small business more profitable.