Top 4 Small Business Tax Deductions You Should Know About

For small business owners, tax season can be stressful. You’ve worked hard to keep your business running smoothly, but now you’re facing the challenge of filing your taxes. The good news is that there are several ways you can reduce your tax burden and keep more money in your pocket. One of the best ways to do this is by taking advantage of small business tax deductions. In this blog post, we’ll explore the top 4 small business tax deductions you should be aware of. We’ll explain how these deductions work, who can benefit from them, and how you can use them to your advantage.

Whether you’re a seasoned entrepreneur or just starting out, understanding these tax deductions will help you save money and ensure you’re compliant with the law.

What Are Small Business Tax Deductions?

Before we dive into the top 4 small business tax deductions, let’s quickly define what tax deductions are. A tax deduction is an expense that you can subtract from your taxable income. This means that instead of paying taxes on your full income, you only pay taxes on the amount left after deductions. The more deductions you have, the lower your taxable income and, therefore, the less you’ll owe in taxes.

For example, if your business earned $100,000 in a year and you have $30,000 in eligible deductions, you’ll only pay taxes on $70,000.

Now, let’s talk about the top 4 tax deductions that can help your small business reduce its tax bill.

1. Home Office Deduction

If you work from home, the home office deduction can be a game-changer. It allows you to deduct a portion of your home’s expenses—like rent or mortgage, utilities, and even internet bills—if they are used for business purposes.

How Does It Work?

To qualify for the home office deduction, you must use a part of your home exclusively and regularly for business purposes. This means that if you use a corner of your living room or a spare bedroom as your office, you can deduct a portion of your rent, utilities, and other related expenses. The size of the deduction depends on the percentage of your home that is used for business.

For example, let’s say your home is 2,000 square feet, and your home office is 200 square feet. Your office space accounts for 10% of your home, so you can deduct 10% of your rent, electricity, and other home expenses.

Who Can Benefit?

This deduction is beneficial for any small business owner who works from home. Freelancers, consultants, remote workers, and home-based business owners can all take advantage of this tax break.

Example: Imagine you run a graphic design business from your apartment. You spend about 10 hours a day working in your home office. You can claim 10% of your rent and utilities as a business expense, reducing your taxable income.

How to Claim It:

Calculate the percentage of your home that is used for business.
Keep detailed records of all your home-related expenses, like rent, utilities, and internet bills.
File IRS Form 8829 to calculate and claim your deduction.

2. Business Meals and Entertainment

Another valuable deduction for small business owners is business meals. If you’re meeting with a client, supplier, or potential partner over a meal, you can deduct 50% of the cost of the meal. This can include breakfast, lunch, dinner, or even coffee meetings that are directly related to your business.

How Does It Work?

For meals to qualify, they must be necessary and ordinary for your business. This means that they should be a reasonable part of conducting business—such as discussing a project with a client over lunch. However, meals with friends or family that aren’t business-related won’t qualify.

Additionally, entertainment expenses related to business—like taking a client to a concert or sporting event—are no longer deductible under current tax laws. However, business meals during entertainment events can still be partially deductible.

Who Can Benefit?

This deduction is great for business owners who regularly meet with clients or partners over meals. This could include small business owners in industries like real estate, consulting, marketing, and sales.

Example: Let’s say you run a consulting business, and you take a client out to lunch to discuss a new project. The total bill is $60. You can deduct $30 of that meal as a business expense, lowering your taxable income.

How to Claim It:

Keep detailed receipts of your business meals, including the date, amount, and purpose of the meal.
Record the business reason for the meal and the names of the people you dined with.
Use IRS Form 1040 Schedule C to deduct these expenses as part of your business expenses.

3. Business Equipment and Supplies

If you purchase items that are necessary for running your business, you may be eligible to deduct the cost of those items. Business equipment and supplies—such as computers, printers, office furniture, and other tools—are all tax-deductible. Additionally, you can deduct the cost of everyday supplies like paper, pens, and software.

How Does It Work?

The IRS allows you to deduct the cost of business equipment in two ways:

Section 179 Deduction: If you purchase equipment for your business, you can deduct the full cost of the item in the year you bought it, instead of spreading it out over several years. This is especially helpful if you make a large purchase, like a new computer or office furniture.
Depreciation: For more expensive equipment (e.g., a vehicle or building), you can depreciate the cost over several years, claiming a portion of the expense each year.

Who Can Benefit?

Any small business that purchases equipment or supplies for daily operations can benefit from this deduction. This includes businesses in nearly every industry, from tech startups to brick-and-mortar stores.

Example: If you run a photography business and buy a new camera for $2,000, you can deduct the full cost of the camera under the Section 179 deduction.

How to Claim It:

Track all your purchases for equipment and supplies.
For items under Section 179, file IRS Form 4562 to claim the deduction.
For items that need to be depreciated, use IRS Form 4562 to calculate depreciation.

4. Employee Wages and Benefits

If you have employees, the wages you pay them, as well as the benefits you offer, are tax-deductible. This includes salaries, hourly wages, bonuses, and even health insurance premiums or retirement plan contributions you provide for your staff.

How Does It Work?

You can deduct wages and salaries paid to your employees, as well as contributions to their benefits. For instance, if you pay $50,000 in wages and $10,000 in health insurance premiums for your employees, you can deduct the entire amount from your business income, reducing your tax liability.

Who Can Benefit?

Any small business that has employees—whether they are full-time, part-time, or contract workers—can benefit from this deduction. It’s a great way to lower your taxable income while also supporting your staff with fair wages and benefits.

Example: Suppose you run a small restaurant and pay your waitstaff $100,000 per year in wages. You can deduct that $100,000 from your business income, as well as any employee benefits like health insurance or retirement contributions.

How to Claim It:

Keep accurate payroll records.
Record all employee wages, bonuses, and benefits paid throughout the year.
File IRS Form 941 for payroll taxes, and Form 1120 for corporate tax returns.

How to Obtain Funds Quickly for Your Small Business

While tax deductions can significantly reduce your tax burden, there may be times when your small business needs additional funds to cover expenses or invest in growth opportunities. This is where SVP Funding Group can help. They offer quick, flexible funding options designed for small businesses.

How It Works:

Apply Online: Visit the SVP Funding Group website and complete a simple application form. You’ll need to provide basic information about your business and its financial situation.
Get Approved Fast: SVP Funding Group reviews your application quickly, often within 24-48 hours, allowing you to get the funds you need without the wait.
Receive Your Funds: Once approved, the funds are deposited directly into your business account, giving you immediate access to the capital you need.

Apply Now for Quick Business Funding

Who Can Benefit?

Small businesses across various industries can benefit from quick funding. Whether you’re looking to cover payroll during a slow month, invest in new equipment, or pay your tax bill, SVP Funding Group provides a simple and fast solution.

Conclusion

Understanding and utilizing small business tax deductions can make a huge difference when it comes to reducing your tax liability. The top 4 small business tax deductions—home office, business meals, equipment, and employee wages—are just a few ways you can save money while running your business. Be sure to keep track of your expenses, consult with a tax professional, and claim these deductions to maximize your savings.

And if you find yourself in need of quick funding to cover business expenses, don’t forget that SVP Funding Group is here to help. By applying for funding, you can quickly access the capital you need to keep your business running smoothly and take advantage of all the tax deductions available to you.

Apply Now for Quick Business Funding

By making smart use of tax deductions and securing the funds you need, you

’ll be able to focus on what really matters: growing your business and ensuring long-term success.