If you’re a small business owner, tax time can be particularly complicated.
Not only do you have to do your personal taxes, but you also have to keep track of all the deductions and receipts for your business as well.
With all those balls in the air, you’re likely to drop a few and forget to claim some important deductions.
Here are some of the business and personal deductions that business owners often overlook:
If you incurred expenses prior to officially starting your business, you can claim those expenses on your business’ tax return. These costs could have been incurred from exploring different opportunities, testing products, paying for courses, or paying for professional fees for lawyers or accountants to help you set up your company.
In your first year of business, you can deduct up to $5,000 in startup costs. If you have more than $5,000 in startup expenses, you can amortize them over 15 years. However, if your startup costs are more than $50,000, there are certain limitations.
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Many companies who are not able to use certain deductions in previous years forget to carry them over into the current year. These carryovers are often for things like capital losses, charitable contributions, and major purchases that have to be amortized over several years.
Keep a list of all your carryover deductions to make sure you remember them.
Charges incurred for bank services like ordering checks, ATM withdrawals, and annual credit card fees are all deductible. If you use your personal credit card or bank account for business expenses, then you can either be reimbursed by your business (and take the deduction there) or you can claim these expenses on your personal return.
The Small Business Health Care Tax Credit
If your business provides a health care plan for your employees through the Small Business Health Options Program (SHOP) Marketplace, your business could be eligible to for a tax credit of up to 50 percent of what you paid in 2015.
There are a few criteria you have to meet in order to qualify, such as having a company with fewer than 25 employees, having an average salary at your company of less than $50,000, and contributing 50 percent or more of the premiums for the health insurance plan.
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If your business hired a veteran, then you may be eligible for a Work Opportunity Tax Credit. Depending on how long the veteran had previously been unemployed and whether the veteran is disabled, you can get a credit for a percentage of the income you paid to your employee.
Home Office Deduction
Many people who own their own business can claim a deduction for their home office. The IRS lets you claim a portion of your rent or mortgage plus other expenses like insurance, heat, and electricity.
If you use your personal cell phone, home phone, or home internet for business, you can also often deduct a portion of these costs.
Many people don’t claim the home office deduction because they find the process too complicated. There are two conditions for claiming a home office, the first is that you use a space in your home as a principal place for business and the second is that the space is used regularly and exclusively for business.
For more information about how to claim this tax deduction, the IRS has created this useful resource.
Business Use of a Personal Vehicle
If you use your personal vehicle for your business, you can choose to claim a portion of your vehicle as a business expense or as a personal tax deduction. If you decide to claim it as a personal tax deduction, keep track of the trips that you take for work.
You can either claim mileage (57.5 cents per mile), parking and tolls for each of those trips or you can claim actual expenses for your car which would include a portion of your vehicle expenses like insurance payments, maintenance and repairs, gas, parking and tolls.
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Student Loan Interest
Most people forget about an important deduction that can save them a lot of money. If you have student loans, you can often claim the student loan interest that you paid last year as a deduction. This deduction allows you to claim up to $2,500 per year, but phases out depending on your modified adjusted gross income.