When it comes to business expenses, the IRS will allow you to deduct anything determined to be both ordinary and necessary. To be ordinary, the expense must be common in your industry. Necessary expenses are items and services that are appropriate and helpful for your business.
Because a majority of industries require businesses to have insurance, it falls under the “ordinary and necessary” category. This distinction means that most of the insurance premiums you pay are eligible for tax deductions. Common types of business insurance that get written off include:
- General liability insurance.
- Professional liability insurance.
- Workers’ compensation insurance.
- Data breach or cyber liability insurance.
- Commercial auto insurance.
- Business interruption insurance.
Business Expense Write-Offs
Aside from insurance, there are plenty of other business expenses that you can write off. As long as the expenses are ordinary and necessary, they’re tax-deductible. Items like accounting fees, bank fees, interest payments and equipment needs are generally covered under this umbrella. You can also deduct half of your social security and Medicare taxes from your personal return if you’re self-employed.
While personal items are usually not tax-deductible, you may be able to write off some of those expenses if you also use them for business reasons. If you work from home, you can split costs like rent or mortgage, insurance, and utilities based on how often you use your home for business reasons. The same is true for your vehicle, which you can track by mileage.
Any equipment you purchase for your home office also falls into this category, assuming you use it for personal reasons, too. If you only use it for work, the full price of it may be deductible.
As a small business, you need to save money wherever you can. Luckily, there’s a whole host of items and other things that are tax deductible for small businesses. Here are 10 things to know about tax deductions that will save you money.
1. Your Home
If you have a dedicated space in your home that you use for your business, you can write it off your taxes. The room must get used exclusively as your office, and you need to spend the most time conducting business activities at that location. The IRS said you could deduct $5 per square foot of your home that qualifies, with a maximum of 300 square feet.
2. Your Car
Your car also doubles as your company car if you’re using it to make business trips. If you have a car that’s solely for business, you can deduct the entire thing. If it doubles as a business car and a personal car, you can write off what you use for the business. You can also claim mileage, so make sure you keep track of the number of miles you’re driving.
3. Advertising and Promotion
The only way people will learn about your business is if you advertise and promote it. This process includes things like printing your business cards or a sticker with your logo that you put on the door.
4. Child Care Costs
It’s difficult to get any work done as a small business owner when you’re also taking care of your kids. Luckily, childcare expenses are deductible if you’re working or looking for work while they’re in daycare.
5. Education
You can deduct the cost of education if it adds value to the business or increases your knowledge and expertise. This addition includes seminars, webinars, classes, books, workshops and even the costs to get to and from the class.
6. Your Employees’ Salaries
If you have employees, you can usually deduct what you pay them. Benefits and vacation time are also tax deductible as long as you actually provide the services, the employee isn’t the sole owner of the company, and the salary is reasonable.
7. Travel Expenses
It’s not just mileage and car expenses that you can deduct. Did you fly to an important business meeting? Take the train to pitch an idea to a client? Travel expenses that are solely for your business are tax deductible.
8. Your Utilities
If you operate your business out of a separate space that’s either in your home or in another building, you can deduct utilities. Electricity, your phone bill and your internet costs are all included.
9. Business Meals
Many business conversations and deals happen over a meal. When you pay for your own dinner or that of a client, keep the receipt and remember the date of the meal to write it off your taxes.
10. Business Insurance
Finally, your business insurance is tax-deductible. If you want to learn more about business insurance, or if you need a quote, contact Strock Insurance today.
Non-Deductible Expenses
Before you write all of these expenses off, you should consult with an advisor who can help you understand tax laws for your business. Certain types of insurance for employees are not eligible for tax deductions. Health, life, disability and unemployment insurance are also more nuanced when you’re paying taxes on them, so consult with a professional to avoid any penalties.
Contact Strock Insurance for Business Insurance
Now that you know some business insurance expenses are tax-deductible, get started with the best insurance agents in central Pennsylvania. Strock Insurance can provide you with both personal and professional insurance options, ranging from business to home, auto and life. If you need business insurance in Harrisburg, Lebanon, Camp Hill or the surrounding areas, contact us now so you can get a quote for your business insurance today.