8 Crucial Tax Deductions Small Business Owners Can’t Forget

With the end of quarter three right around the corner, many of us are starting to  examine our goals and reevaluate our plans for quarter four and a lucrative end to 2023. Small business owners, especially, are anticipating high holiday sales and happily dreaming of exciting new growth.   

Unfortunately, all business growth requires money—and nothing eats your hard-earned profits like botching your business taxes.   

The phrase “tax season” may send a shiver down your spine, but with guidance (and a microscope to read all that fine print!) you can take advantage of common tax deductions and ensure you’re never paying the Fed more than what they’re owed.  

Here are eight crucial tax deductions to keep on your radar as a small business owner.   

1. Startup costs 

Most business owners are used to making skyscraper-length lists of business expenses to stockpile away until tax season, but did you know you can actually write off money spent before your business launched? Obviously we’re not talking about your day-to-day purchases or ingredients for taco Tuesday, but any money you invested in your business before selling a product counts as a tax write-off.   

You might need to check a few conditions, but odds are you can offset your first fiscal year by thousands of dollars. Talk about getting started on the right foot!  

2. Payroll 

There’s no one right way to pay yourself when you own your own business—and you should be paying yourself, and keeping your personal and business finances separate, make no mistake! However, some payment methods have very different impacts when April rolls around. If you’re compensating yourself in dividends or similar payouts, then you end up paying more taxes on the personal end because you’re qualified as self-employed.   

Instead, add yourself to your own payroll. If you give yourself a wage or salary, then you’re just another employee of your business and your personal taxes line right up! You can also then claim your own wages as part of your employee wage/payroll deductions.   

3. Debts owed  

Dealing with debts owed to your business is always frustrating, but it’s even more frustrating when you’re just trying to file your darn taxes. Unfortunately, income is income—even if that income hasn’t hit your bank account. That means that any credit purchases or loans you might be waiting on don’t count in terms of your general taxable income.   

However, you can deduct debts owed (or bad debts) as part of your business deductions! By doing so, you lower your taxable income and can file based on the actual money you have in your accounts.   

4. Home office supplies and needs 

This is one of the most-frequently missed deductions amongst small businesses—and it’s no surprise! Especially over the past couple years, small businesses put hundreds to thousands of dollars into working from home and many new small businesses are now opening with their home office as home base.   

Now, you might think a stapler here or an ink cartridge there isn’t that important, but home office deductions aren’t just about small supplies. If you have a dedicated home office, you can deduct everything from pens to homeowner’s insurance. For a more detailed list, be sure to check out the IRS guidelines for home offices. No deduction is too small for your small business.  

5. Marketing 

Social media gives small businesses many new and affordable options to get the word out, but even if you only spend $5, that’s $5 you need to be deducting. ANY marketing expense you pay in the name of your business is a tax deduction—it doesn’t matter if it’s thousands of dollars on a billboard or $20 to spruce up your website. Marketing personnel count too! If you hire a marketing consultant or a PR expert, every cent they earn counts as a marketing expense.  

6. Company travel and entertainment 

Travel and entertainment deductions have to be taken with a grain of salt, but they can still massively impact your overall taxes. The key to these deductions is relevance, relevance, relevance.   

For instance, if you own a local bakery and you take a trip to New York City, you can’t reasonably deduct the cost of a Broadway show. It’s not relevant to your company. HOWEVER, you could absolutely deduct the cost of any purchases made at famous bakeries because you could make a case for those expenses as education. Similarly, you couldn’t deduct the cost of a ferry ticket to see the Statue of liberty, but you could deduct the cost of a taxi ride from your hotel to a meeting.   

When you keep expenses relevant, you keep the deductions rolling right on in.  

7. Training and onboarding 

If you’re just starting your small business, you and your employees have a lot to learn in a radically short amount of time—and you have to pay for every second of it. Luckily, training/onboarding times and resources are heavily deductible!  

The thing to remember when deducting these costs is to properly split them into categories. Staff pay during onboarding is a training cost, but will always be filed as a payroll/salary expense. Similarly, team bonding experiences—such as escape rooms or luncheons—will usually be filed as entertainment expenses. Specific training expenses will usually refer to materials needed for training including software or printed packets.   

8. Equipment rentals  

When your business requires you to rent expensive equipment, those costs add up! Large machinery costs a significant amount of money—especially when you’re adding on operating costs like fuel or specialized staff. The good news is, all rentals for your business are 100% deductible, no questions asked!   

The bad news is that the minute you try to save money by purchasing that equipment, these deductions disappear. That means if you own a work van, you cannot regularly deduct the cost of that van. You CAN, however, deduct any expenses on maintenance or insurance for that van, which still gives you a nice financial boost.   

Work with an accountant to account for all deductions!  

Personal taxes alone can be a daunting experience, so there’s no shame in asking for a bit of help with your business taxes and documentation. The last thing anyone wants is the IRS banging down their door because they innocently deducted a pen instead of a pencil. Never fear! Know Your Numbers Accounting is here to help small businesses navigate the treacherous taxation landscape. Contact KYN today for maximum returns with minimal effort.