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Tax Deduction for Small Business in Fullerton, CA

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1. Inventory: If you sell or manufacture products, you can deduct the cost of goods sold. For manufacturers, this includes the cost of materials and the labor needed to produce the goods. Distribution and sales force costs, however, aren’t deductible.

2. Employee pay and benefits: Costs for employee salaries, properties, and services can be deducted. You can also typically deduct money you’ve spent on employee benefits, such as health plans and life insurance. If you’re self-employed and pay for your own life insurance or retirement plan, you can also deduct those expenses.

3. Pay for contractors and freelancers: Expenses paid to hire temporary workers are also deductible. 

4. Payments to employees’ pension plans: If you made any contributions to employee 401(k)s, you can deduct those costs on your tax return. Other payments to qualifying retirement and profit-sharing plans may also be deducted.

5. Standard IRS mileage for business vehicles: You may use the IRS’s standard mileage rate to calculate a commercial vehicle deduction. As of Jan. 1, 2018, the rate that applies to cars, vans, pickup trucks and panel trucks is 54.5 cents per mile for business travel; 18 cents per mile driven for medical or moving purposes and 14 centers per mile driven in the service of charitable organizations.

6. Actual expenses related to commercial vehicle use: You may receive a greater deduction by calculating your actual vehicle expenses instead of using the IRS’s standard mileage rate. Actual expenses cover all costs related to fueling, repairing and maintaining your commercial vehicles. Calculate your actual expenses and the IRS’s standard rate, and select whichever will give you the larger deduction.

7. Business-related travel expenses: In addition to mileage and costs for maintaining vehicles, you can claim other expenses that you incur while traveling for business. This includes things such as business meals, paying for parking, staying in a hotel and the cost to attend a conference. Note that you’ll have to separate business-related travel expenses from personal expenses when you fill out your claim form.

8. Equipment and supplies: If you purchase computers, printers, phones and fax machines and use them exclusively for business, they can be deducted on your tax return. Account for your office supplies as well. This includes things such as paper clips, sticky notes and printer ink.

9. Utilities: Water, electricity and trash services are counted as regular business expenses. Note that you may only fully deduct utilities if you use them exclusively for business. If employees use phones for business and personal calls, for example, you may only claim part of your phone bill as a deduction.

10. Ongoing education: If you purchase a book to learn a new skill related to your business, you can deduct the cost. If you attend a class for the same purpose, you can deduct that cost. Any magazines, DVDs or books you purchase and any tradeshows or seminars you attend — if they have to do with improving relevant skills in your current career — are tax deductible. You can also deduct the membership fees of professional organizations or the cost to take a certification quiz or exam.

11. Your personal office space: If you run your business entirely from home or just keep an office there to get some work done on the weekends, you can deduct equipment purchases, utility bills and even the cost of paying for that space compared to what you pay for your home each month. However, the office space and any equipment or utilities you claim must be used solely for work. For utilities that you share with your family or equipment that you use for work and entertainment, such as a computer, you can’t claim a full deduction.

12.  Networking: If you’re meeting with a client over lunch to talk business, you can claim the cost of the meal on your taxes. Similar meetings, whether they’re over drinks or at a sports game, are deductible if the meeting occurs in a business setting or happens after or before a meeting.

13. Petty cash, tips, and processing charges: If you tip a doorman at your hotel while you’re traveling on business or leave some cash for the bartender before you and a client conclude your meeting, you can deduct that expense. This may seem insignificant, but if you do lots of traveling or regularly visit with clients over meals, it can add up. Don’t forget to deduct credit card processing fees for business-related expenses.

14.  Advertising: You can deduct what you pay to promote your business or yourself (as long as it’s in a professional capacity and related to your small business). This includes standard advertising, like the cost to rent ad space in a magazine or on a billboard, as well as things like purchasing a LinkedIn Premium subscription or running an ad campaign on Facebook or Twitter.

15.  Sponsorships and gifts: If you sponsor a local event, you can deduct that expense. You can also deduct gifts that you purchase for employees or clients.

16.  Consultation fees: If you meet with a specialist about starting a business, entering a new market or anything else related to your current enterprise, you can claim it on your tax form. This includes attorney and accountant fees as well.

17.  Depreciation: If you purchase property — furniture, a building, vehicles, etc. — you can choose to either claim the entire cost in the tax year when you made the purchase or report its depreciation over time. Depreciation can be a good strategy for large purchases if your tax rate changes in the future. Deciding whether to claim direct expenses or depreciation is challenging. Moreover, you’ll have to file new forms and outline what you purchased, the cost and the depreciation period. Consider consulting with a tax specialist if you think a depreciation deductible may benefit you.

18. Repairs and maintenance: Deduct any costs for repairs and maintenance to your building, office equipment, vehicles and all other business property.

19.  Insurance premiums: Premiums that you pay to hold any type of insurance related to your business operations are tax deductible.

20.  Interest: If you pay any interest on business loans or the mortgage to your business property, the amount is deductible.

21.  Software: Software that you install on your business computers and employees’ devices is deductible. You can also claim any subscription costs you have to pay to use those services.

There are several other deductions that might apply in your case. For example, some business may claim the taxes that they pay to run the business as a deduction. Moreover, some deductions only apply in certain situations. Bad debt, for instance, is only deductible if what you owe was previously included in your income.

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We help business owners and other individuals with tax goals and complexities understand, plan execute the various aspects of AMT, charitable contributions, estimated payments and withholdings, energy-saving home improvement credits, and gift tax. All of our work is tailored to the individuals needs and is integrated for both federal, state and local taxes.