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Tax time is rough for everyone, but it can be particularly brutal for business owners. Everyone needs a little help from time to time, but business owners need to find every break they can to help them stay in business and grow their company.
However, these breaks aren’t just handed to you, and you have to know what they are ahead of time to take full advantage. According to an Outright study completed last year, business owners leave two major tax deductions on the table every year… and taking these deductions could save them tons of money!
Don’t let this happen to you! Here are two of the most common tax deductions you should absolutely take (if you qualify) to ease your tax burden.
The Home Office Deduction
The home office deduction allows a small business owner to deduct a portion of rent/mortgage, utilities, cable, etc. that they spend on their home office space. However there is one caveat: if you want to claim expenses associated with your home office you have to have a dedicated space in your home for work. The space must be exclusively used for business purposes or you cannot take the deduction.
So for example, if you use your guest room for working and storing your work related files, and that’s the only reason you use it, you can claim the guest room as a home office. If that room doubles as the kid’s playroom, then it’s no longer exclusively a home office and you can’t take the deduction.
A number of rumors swirl around this deduction. Check out Outright’s home office deduction guide for more.
Mileage
Trips are part of any small business, no matter how big or small. What you may not realize is all these trips can be tallied up to take one big tax deduction. While one trip to the post office to mail an order may not be a huge deal, fifty trips over the course of a year certainly is!
You also may not realize just how many trips for your business you make over a year. A business trip, in your case, isn’t just a cross-country trip to a conference; it can also be a trip across town to meet with a client. Even the smallest jaunt to the store for office supplies counts.
There are two main ways to take the mileage deduction: “Standard Mileage” and “Actual Expense.” Click here for more detailed info on the mileage deduction.
With self-employment taxes, finding your own insurance solutions, and perhaps taking care of employees, too, small business owners need every tax deduction they can get. Don’t hand over these two significant deductions to Uncle Sam when you don’t have to!