Taxes can be a confusing element of business ownership, but understanding the deductions for which you may qualify can give your financial health a serious boost. Your small business may be able to take advantage of a range of tax deductions that can optimize your profit. Let’s take a look at a few deductions and how you can capitalize on them effectively.
Start-Up and Organizational Costs
As an entrepreneur, you make significant investments even before your business starts to generate revenue. These initial investments, such as market research, advertising for your grand opening, employee training, and legal services, are start-up costs.
The IRS allows small businesses to deduct up to $5,000 each in start-up and organizational costs in the year they begin business. And if you use a Rollover for Business Start-Ups to finance those investments, you save even more money by bypassing loan repayments.
Business Property Rent
Do you rent an office space or other business property? If you’re leasing an office, storefront, factory, or another property for your operations, you can typically deduct those costs. This includes any rent you pay for the physical spaces and can also potentially extend to storage units and other rented facilities your business needs.
Section 179 Deduction
This deduction is a valuable tool that allows businesses to deduct the full price of qualifying equipment they purchased during the tax year. In other words, if you buy or lease a piece of qualifying equipment, you can deduct the entire purchase price. For the tax year 2024, the IRS allows businesses to deduct up to $1,220,000 worth of property placed in service.
What Is Qualifying Equipment?
Items eligible for the section 179 deduction include industrial machinery, heavy vehicles between 6,000 and 14,000 pounds, and office equipment and furniture.
Business Meals and Travel Expenses
If you’re traveling for business or dining with clients, these expenses can add up quickly. The good news is that the IRS lets you deduct a portion of these costs. Business meals are deductible at a rate of 50 percent, provided they are not lavish or extravagant. Similarly, work-related travel costs, like airfare, hotel stays, and car rentals, are also deductible, given that they are ordinary and necessary expenses.
In the world of small business, every dollar counts. You can reduce your tax liability and increase your bottom line by taking advantage of the right tax deductions. Remember to keep detailed records of these expenses to substantiate those deductions, and consult with a tax professional to ensure you’re applying them correctly.
Need a little extra cash to finance your dream start-up? Use Pango Financial’s funding solutions tool for more information about your options.