Among the most common expenses and business deductions for small businesses are the expenses of getting the business started, auto expenses and travel expenses, office equipment and supplies, and advertising and promotion.
One of the major tax-deductible expenses for a small business is the startup costs associated with getting the business up and running. These initial startup costs for a business are considered capital expenses for tax purposes.
A new business owner can deduct up to $5,000 for the first year the business is operating. Any expenses beyond that amount must be taken as deductions in equal amounts over the next five to 15 years.
Auto expenses can lead to a substantial tax deduction if the business requires significant travel. There are two choices for tracking and deducting auto expenses. The actual expenses method can generally provide a greater deduction, but it requires keeping accurate records of all business-related auto expenses. Alternatively, the deduction amount can simply be determined by deducting the appropriate amount for each
mile driven in the course of business.
In addition to deducting expenses for an automobile used for business purposes, business travel expenses are also tax-deductible. These business travel expenses include airfare, hotels and meals.
Special Deduction Allowances
Both office equipment, such as computers and furniture, and office supplies, such as stamps and pens, are tax-deductible expenses. Office supplies are deducted as ordinary business expenses. Office equipment may qualify as a capital asset that must be depreciated over the asset's useful life.
Taxpayers should consult the current tax regulations regarding bonus depreciation and Section 179 deductions, because either of those regulations may provide the ability to take significantly larger direct-expense deductions, eliminating the need to gradually recover equipment costs through depreciation. For example, under Section 179. it's possible to write off the cost of a computer system in one year if the total cost, including software, is less than $25,000.
Marketing and advertising expenses, including business cards, brochures and website expenses, are tax-deductible business expenses as well.