It’s everyone’s favorite time of year: tax time. For certain types of businesses, the deadline is today. For others, it’s April 15. Yet for the rookie entrepreneur, knowing when to file is just step one in a typically arduous process.
For them, tax time often spells a whole new world of questions and challenges. From credits to capital losses, February through April of a business’ first year usually results in more tax knowledge acquisition than any entrepreneur ever wanted to know. Yet there always seems to be “one more thing,” — particularly in the deductions department.
Below are a few of the most often overlooked business-tax deductions at the federal level. From the obvious to the obscure, this list is by no means comprehensive, yet it’s a good start. For a more customized take, an accountant is your best resource.
If you took out a loan to get your operation up and running, there could be a deduction hidden in there. Usually, business owners will apply their entire loan payment against the loan balance. But in reality, a part of each payment should be denoted as your interest expense. Make sure that is adjusted. If it’s not, you could be missing out on a sizeable tax deduction.
If you have outstanding invoices, do your best to try collect on them. If it’s impossible to collect, you may be able to write off the bad debt and get a tax deduction. (This is one to run by your tax advisor, just to be sure.)
Amortization of intangible assets
Amor-what? Exactly. To clarify: Amortization is essentially the practice of deducting the cost of an intangible asset over its projected life. And what’s an intangible asset? Well, if you bought things like logos, trademarks and customer lists, those are called intangible assets, or “goodwill.” These can be amortized over a specific number of years, and can help lower your taxable income today.
Business use of a personal vehicle
If you use your personal vehicle for business travel, don’t forget to account for expenses like miles on the road and maintenance. Even the miles you drive to meet your accountant count.
Home office space
Most folks are aware of this one, but if you work from home it’s possible to write off a portion of your home’s utility, rent and other payments. This post from the IRS regarding the home-office deduction gives a comprehensive overview and links to the relevant forms.
As mentioned, this isn’t a comprehensive list. And as with all tax related issues — especially deductions — your accountant or business tax professional is your most valuable resource.
– Kashoo accounting expert Sandra Tomlinson contributed to this post.
What other tax tips would you suggest fellow entrepreneurs consider? Let us know in the comments section below.