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Tax Deductions for Small Businesses

Filing taxes is tricky and time consuming enough, but because of the recent changes to the tax code, the 2017 Tax Cuts and Jobs Act (TCJA), there are deductions that small business owners shouldn’t overlook. Here at SD Associates, we’re always up-to-date on the latest changes on all things tax-related, so here are few tax deductions for small businesses that need to be considered during the next tax filing season.

Qualified Business Income Deduction
The Qualified Business Income deduction (also referred to QBI deduction, pass-through deduction, or section 199A deduction) is in effect for tax years 2018 through 2025.  With the QBI deduction, whether they itemize or not,  most self-employed taxpayers and small business owners can exclude up to 20% of their qualified business income from federal income tax. Self-employment taxes are excluded. Limitations are based upon taxpayer’s total taxable income. Once the taxable income reaches or exceeds $157,500 ($315,000 if filing jointly), the type of business may come into play. Calculations can get  very complicated. If you’re looking to claim this deduction or gain a better understanding, it’s best to reach out to SD Associates before the year end.

Business Vehicle Deduction
If you’re a business owner and use a vehicle, how and when you deduct for the business use those vehicles can have significant tax implications. There are many decisions such as is it better to use the standard mileage rate as your deduction or actual expenses; Who should own the vehicle? The business, the business owner or the employee; Should the business buy or lease the vehicle?   To get the most out of your business vehicle deduction, schedule an appointment with a tax expert to discuss the option right for you and your business.

Home Office Deduction
Although some small business owners are nervous to claim their home office as a tax deduction, when handled by an experienced tax professional, it can be a deduction on your next return. In order to qualify,  and you use part of your home regularly and exclusively to perform administrative or managerial activities for your business, you can claim a home office deduction. The IRS has criteria to help you determine if your space qualifies for the home office deduction. In addition, to an office in your home, garages and other types of free-standing structures may also qualify.

Retirement Plan Contributions
Far too often, small business owners think that setting up a retirement plan only results in serious tax savings if you’re a large corporation—this couldn’t be more wrong. For small businesses that have few to no employees you still have many options from defined contribution or a defined benefit plan. With the help of SD Associates, we can assist you to determine which retirement plan that works best for your business and will result in the most advantageous tax savings. 

Section 179 Deduction
Under TCJA A taxpayer may elect to expense the cost of any section 179 property (i.e. computers, equipment, machinery and vehicles) and deduct it in the year the property is placed in service. The law increased the maximum deduction to $1 million,  with certain limitations and adjusted for inflation.  The law also expands the definition of section 179 property to allow the taxpayer to elect to include the improvements made to nonresidential real property after the date when the property was first placed in service.

As a small business owner, you have enough responsibilities, so when it comes to your taxes, don’t take care of them alone—let the professionals at SD Associates take care of them for you! From planning to strategizing, we’ll help you maximize your deductions and make it easy to file your taxes. Contact us today!

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