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For small businesses, understanding and utilizing tax deductions can significantly reduce tax liabilities and improve financial health. As a CPA firm, we’ve compiled key strategies to help you navigate the complex world of tax deductions.

  1. Start-Up Expenses: Entrepreneurs can deduct up to $5,000 in expenses incurred before starting a business, such as market analysis, product research, and training costs
  2. Qualified Business Income (QBI): This allows a 20% deduction based on net income for the year for sole proprietorships, partnerships, or S corporations, as well as certain dividends and income from trusts or estates​
  3. Business Loans: Interest on loans or credit card charges used for business expenses are deductible, provided they meet IRS requirements​
  4. Bad Debt: Deduct bad debt when your business is owed for unpaid amounts, including loans to clients or suppliers, goods sold but not paid for, or mortgaged property sales​
  5. Business Insurance: Costs for business insurance, including those covering home offices, are deductible, ensuring that risk management strategies are financially efficient
  6. Direct Home Office Repairs: Fully deductible expenses for repairs within the home office, like fixing office windows or painting office walls.
  7. Parking and Tolls for Business Trips: Fully deductible when incurred during business-related travel.
  8. Deductibility of Storage Unit Expenses for Business Use: Expenses related to a storage unit are fully deductible when the unit is used exclusively for business purposes. This includes storing business inventory, equipment, files, or materials necessary for business operations. The key factor for deductibility is the exclusive use of the storage space for business-related activities, without any personal items stored in the same space. This exclusive business use must be justifiable and consistent with the nature of the business operations.
  9. Clean Commercial Vehicle Credit: Offers tax credits of up to 30% of purchase costs for clean commercial vehicles, such as electric and fuel cell models, with no limit on the number of credits a business can claim.
  10. Solar Power Tax Credit: Small businesses can get a 30% tax credit for the cost of transitioning to solar power, reducing energy costs.

Tax deductions are essential for small businesses, offering significant savings and improved profitability. Understanding available deductions, from office costs to energy efficiency incentives like those in the Inflation Reduction Act, is key. Meticulous documentation and professional advice are crucial for compliance and maximizing benefits.

At Nelson & Associates, CPAs we specialize in guiding small businesses through these complexities, ensuring they leverage every opportunity to reduce tax liabilities and strengthen their financial health. Our expertise can help you navigate these waters with confidence and ease.