15 Biggest Tax Write Offs for Small Businesses! [Best Tax Deductions 2024]

hey sherman the cpa here at life accounting today i want to help you save on taxes by giving you the biggest tax write-offs for small businesses in 2022. millions of people overpay on their taxes every single year because they fail to take the tax deductions that i'm about to share with you right now my last video on this topic helped nearly 500 000 people last year and i will provide you with even more helpful information in today's episode so stick around until the end take out a notepad to jot this stuff down and go ahead and like this video to help us get this information out to more business owners like yourself [Music] all right so first and foremost you need to understand how tax deductions work section 162 of the internal revenue code says that you can deduct all ordinary and necessary expenses paid or incurred during the taxable year to carry on any trade or business so basically you can deduct expenses that you incur to run your business for example let's say your business made one million dollars in revenue last year but let's say you incurred five hundred thousand dollars in legitimate business expenses in this case your taxable income after taking the expenses as a deduction would be five hundred thousand dollars now as simple as this sounds a lot of entrepreneurs are not doing this instead many business owners use their total revenue to file their taxes and not what is left after taking tax deductions which is causing them to pay way more in taxes than they were ever supposed to and then there's others who might take some of these tax deductions but fail to take all of the tax deductions that are available to them so to prevent this from happening to you i want to give you the biggest tax write-offs for small businesses all right number one the 20 pass-through tax deduction if you operate as a sole proprietorship partnership llc or s corp then you are a pass-through entity this means that you may be eligible for an automatic twenty percent deduction from your business taxable income so for example if your business made one hundred thousand dollars in business income you could take an additional twenty percent tax deduction and lower your taxable income by an additional twenty thousand dollars in this case and if you were in the 25 tax bracket this would mean that you would save five thousand dollars more in tax expenses by just checking the box for this deduction now there are some eligibility requirements in order to take this tax deduction and i have a full video on our channel that discusses this in detail so make sure that you are subscribed to our channel to learn more number two business vehicles the irs is very clear in that you can deduct the business use of a car if you use your car only for business purposes you may deduct the entire cost of the car up to certain limits and if you use the car for business and personal purposes you may deduct the portion of the car expenses associated with your business use for example if you use your car 50 of the time for business purposes and 50 of the time for personal use then you may deduct 50 of the vehicle cost up to a certain limit now there are a few ways that you can deduct your vehicle expenses you can deduct your business mouths or you can capitalize the vehicle as an asset and depreciate a portion of that cost every single year and if your vehicle weighs more than six thousand pounds you can take bonus depreciation and deduct the full cost of the vehicle number three business travel you can deduct 100 of your business vacation travel and or lodging expenses the key here is to make sure that there is a business purpose for the travel expenses that you incur for example let's say you travel to hawaii for a five day business conference but since you are already there you decide to stay there for 10 days total to also mix in some personal vacation time on the island well in this case you can deduct the full flight expenses to get to in from hawaii and five days of the lodging expenses incurred during the business conference you will not however be able to write off any of your expenses incurred during the five days that you use for personal enjoyment now a good rule of thumb here is to make sure that you do some business each day during your business trip if you want to deduct 100 of your travel lodging and other related expenses number four business meals business meals are 100 deductible for tax years 2021 and 2022. now a lot of people do not know this because they used to be limited to 50 prior to 2021. however this tax deduction was increased in order to help the hospitality industry recover from the pandemic which means you can write off the full cost of your meals from your business taxes however they have to be business meals you need to be eating with someone whether it is your business partner employee customer or prospective customer and be discussing business during these meals it also helps to keep up with your receipts in a log of what was discussed or accomplished during these business meals in the event that the irs has questions about these expenses number five business interest expense if your business has any debt then you can write off the interest expense associated with it now many people confuse this with the total debt payment to your debtors however you cannot deduct the entire monthly payment because some of this payment is allocated towards your own principal your principal payment is not an expense therefore you cannot write this off however you can write off the entire portion that the bank earns from issuing debt to you which is the interest expense number six the home office deduction if you do any work in your business from home at all even if it is just administrative work you should look into taking the home office deduction this deduction allows you to deduct home expenses like your mortgage interest property taxes insurance utilities wi-fi repairs and even depreciation from your taxable income all you have to do is use a part of your home for your business and you can deduct the portion of your home expenses attributable to that part of your home from your taxable income in the past year so many businesses have transitioned to home locations and if that's you make sure you tally up your home expenses and take the home office deduction to lower your tax bill number seven cell phone expenses yes you can write off your cell phone expenses if you use your cell phone for business purposes this includes your physical cell phone and your cell phone service provider it may also include any additional storage requirements you need to hold your business files or mobile applications you pay for to run your business for example if you bought the new iphone pay for icloud storage and you sprint as your cell phone provider you will be able to deduct these expenses from your taxable income when you file your taxes you just need to make sure that you are using them for legitimate business purposes number eight office administrative and technology expenses you can deduct 100 of the direct office administrative or technology expenses you incur to operate your business office expenses may include things like your computers paper pens notebooks and so on administrative expenses may include things like your accounting software or merchant accounts to collect payments from your customers and technology expenses may include any software applications or tools you use to operate your business just keep up with these expenses and you can deduct them when tax time comes to lower your tax bill number nine startup and organization cost now this is a big one especially for new business owners the irs allows you to deduct up to five thousand dollars of business startup costs and another five thousand dollars for your organizational costs startup costs include any amounts paid in connection with creating your business while organizational costs include the cost of creating your entity such as legal fees associated with creating a corporation or partnership number 10 self-employment taxes pass-through entities like llc's partnerships and sole proprietorships are assessed a 15.3 self-employment tax however s corporations are exempt from paying this tax and can still be taxed as a pass-through entity for example if you earn 100 000 in income you would typically pay a little over fifteen thousand dollars in self-employment taxes as a pass-through entity however if you elect s-corp status you would pay no self-employment tax at all though it is important that you know s-corps do have to abide by additional rules such as taking a reasonable salary which is subject to payroll taxes but still those additional taxes are normally much less especially once your business is earning over fifty thousand dollars a year in income number eleven self-employed retirement accounts as a business owner you have access to retirement accounts that offer higher tax savings than traditional accounts for example you may contribute up to 58 000 per year to a solo 401k or sep ira and take this entire amount as a tax deduction when you compare this to the six to seven thousand dollars per year for traditional retirement accounts using a self-employed retirement plan can save you much more money in taxes while also compounding your contributions into greater wealth number 12 health savings contributions health savings accounts are saving accounts for health expenses on the tax side of this the money you contribute to hsas are deductible from your taxable income and as long as you use the money for qualifying health expenses the money is tax-free when you take the money out of your account also unlike retirement accounts you can pull money out of your hsa at any time for any reason without any penalties though you will have to pay taxes on the money you take out unless you use it for qualified health expenses and since everyone will likely have health related expenses at some point in their life setting up an hsa is a win-win for tax purposes number 13 all labor costs this is very important for all businesses especially service based businesses you can and likely should deduct all of the costs you incur to pay anyone to deliver a service that is specific to your business this includes employees and contractors just make sure that you have w-4 forms for all of your employees so you can deduct their w-2 wages from your business income and also make sure that you have your contractors complete w-9 forms when you hire them to do anything for your business even if it is as simple as hiring a contractor to build a website for you you should obtain w-9 forms and issue 1099s at the end of the tax year to write off those expenses from your taxable income number 14 cost of goods sold if you sell products then you can also deduct your cost of goods sold you can deduct your selling cost of products or raw materials storage costs direct labor costs and factory overhead costs for example if you sell coffee cups you can deduct the cost of each coffee cup that you sell and number 15 all ordinary and necessary expenses now this last one is a catch-all like i mentioned at the beginning of this video the tax law allows you to deduct all ordinary and necessary expenses you incur to run and operate your business ordinary means that it is common intercepted in your industry necessary means that it is helpful and appropriate for your business and as long as it meets these two basic requirements then you should ask your accountant if you can write it off or look into the tax rules yourself regarding that tax deduction comment below and let me know if you have any questions on this thank you for watching and i will talk to you soon

Channel: LYFE Accounting

Views: 146,214

Keywords: tax write offs, tax deductions, business deductions, business write offs, tax deductions 20221, tax write offs for small business, tax write offs for small businesses, tax write offs for businesses, tax deductions for self employed business owners

Id: rrPxbI8DXyw

Length: 13min 52sec (832 seconds)

Published: Tue Jan 04 2022