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Small Business Expenses - What to Claim?


Running a small business takes time, hard work, and money. To lessen the financial burden, there are a variety of tax deductions available to small-business owners. While some of these deductions may be familiar, others are new or often overlooked. Eligible small-business owners searching for options to update their tax strategy may be able to take advantage of the following tax breaks.

New Equipment – Businesses that buy new equipment can claim all or some of these purchases as small-business expenses. And potential changes to the Bonus Depreciation tax break mean that business owners may be able to claim up to 50 percent of allowable depreciation immediately, instead of spreading it out over time.

Taxes – Taxes themselves are often overlooked as tax-deductible business expenses. Sales tax on any items required for business purposes, excise and fuel tax for business-related costs, real estate property tax for business properties, and specially assessed property taxes may also qualify for tax breaks.

Home Business Expenses – If part of a home is used for business, a portion of home-related costs may also be eligible for a tax break. IRS publication 587, Business Use of Your Home lists all eligible deductions, which include items such as business furniture and even depreciation of your home.

Health Care Premiums – Many employers who paid health care premiums for their staff qualified to deduct 35 percent of the premiums paid for the 2013 tax year under the Small Business Health Care Tax Credit. Even better? This is increasing to 50 percent for the 2014 tax year.

Business Hardware and Software – New computer equipment and software purchased for business use may be claimed as a legitimate tax break for small-business owners. If the software was bought prior to December 31, 2013, the entire cost may be deducted for the year it was purchased. For more details see IRS Publication 946, How to Depreciate Property.

Advertising and Promotion – Advertising costs are also eligible business expenses. Everything from ads in local directories to the costs of maintaining an online business presence (via a website, social media accounts, etc.) may be eligible. In addition, if a business sponsors an event or sports team to promote goodwill, this may be claimed as long as there's evidence of a promotional effort.

Education Expenses – Academic courses and other educational activities that help contribute to the running and management of a business are eligible business expenses. Learn more from IRS Publication 970, Tuition and Fees Deduction.

Mileage – Whether a business requires daily vehicle travel to conduct daily operations and offer services or products, or whether travel is infrequent, mileage for legitimate business purposes may be claimed as an expense.

Travel, Meals, Entertainment, and Gifts – Business trips, meal costs, entertainment for business purposes, and even qualified gifts may qualify as business expense deductions. While travel and hotel costs are 100 percent tax deductible, business people may only claim 50 percent of meal expenses. To learn more about this sometimes-complex category of allowable business expenses, see IRS Publication 463, Travel, Entertainment, Gift and Car Expenses.

Keeping accurate financial records is important all year long, not just at tax time. Keep your business finance and tax information organized and up to date with online accounting software and keep close track of the business expenses discussed above for easy tax filing come tax time.


This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.