As a small business owner, there are many costs and opportunities for savings that you should be aware of. Optimizing your balance sheets to deliver profitability becomes much easier when you know how your way around small business tax deductions. Successfully running a small business means having a clear overview of the expenses that you encounter throughout the year. Come tax time, it is important to understand that there are many small business expenses that the United States federal government has determined to be tax-deductible.
Which Costs Can I Claim When Filing my Taxes?
There are many different small business tax deductions available for small and medium-sized companies. Areas such as rent, inventory, payroll, and utility costs are some examples of small business deductions that you can claim when you file your yearly taxes. It is important to understand how to use small business tax deductions so that you can be sure you are not overpaying for normal outbound expenses that can be written off.
Taking advantage of small business deductions is an important opportunity that every American business owner should be aware of. Though it is very challenging and time-consuming for many small business owners to file their yearly taxes, the government has created a policy framework that offers special benefits for small business tax filers. In this article, learn more about popular small business tax deductions and importantly, how to use small business tax deductions for your business-use automotive transportation.
Main categories for small business tax deductions
- Advertising and Marketing
- Bad Business Debts
- Business Casualty Losses
- Business Insurance
- Business Interest
- Business Meals
- Business Use of a Car
- Charitable Donations
- Foreign Earned Income Inclusion
- Home Office Expenses and Supplies
- Investment Interest
- Legal Fees
- Moving Expenses
- Phone and Internet Expenses
- Retirement Expenses
- Travel Expenses
- Salaries and Benefits
What Are Small Business Tax Deductions?
Small business tax deductions are available for expenses that the United States Internal Revenue Service (IRS) has allowed to be subtracted from your taxable income. In effect, small business deductions help small businesses save money. The IRS allows small business deductions for expenses that are considered ordinary and necessary. The main purpose of small business tax deductions is to help local, regional, and small online businesses to be less penalized by their state and federal tax burdens.
How Do Small Business Tax Deductions on Business Expenses Work?
When it comes time to file your state and federal taxes as a business owner, there are two main ways that you can choose to claim tax deductions: take the standard deduction or create an itemized deduction based on your accurate expense reports. If you are interested in taking advantage of all the benefits of small business deductions, then it is important to know that itemizing will consistently lead to better outcomes.
Itemizing tax deductions requires that your business keeps a neat, clear, and accurate account of all your business expenses throughout the year. It is essential that you present clear and accurate records to the IRS or there is much less of a chance that you will receive the full deduction amount you are eligible to receive in each category. To file small business tax deductions, you will need to create a list of all the ones you are looking to receive and fill out a Schedule A form to go alongside your tax return.
In case the IRS decides to audit your business, your Schedule A form and up-to-date, accurate tax return will be the documents needed to defend your position. To successfully complete your taxes, you will need to have access to all the information connected to your employee payroll and benefits payments, business income documents, property tax documents, and many other pieces of sensitive financial and institutional information.
How to Take Advantage of the Business Use of Car Small Business Tax Deduction
Even if you run a small business from your home, there are small business tax deductions available for the personal vehicles you use for business purposes. However, if you use a car purely for business purposes, then it is possible to deduct the vehicle’s operating costs from your taxes. If you use a business car for personal and business driving, then it is only possible to take deductions for the approved business expenses related to your car.
When tax expenses for your business car are due, there are two ways to calculate the amount owed. It is important to understand how each of these choices is calculated so you can figure out which method is a better choice for your own situation:
- Standard Mileage Rate Method: To use this method, you will need to have a clear record of all the miles your car has driven for business purposes and multiply that number by $0.575 per mile for your 2020 taxes or $0.56 for your 2021 returns. If you drove 50,000 miles for business in 2021, you would receive a deduction of $28,000.
- Actual Expense Method: For this method, you will need to keep accurate records of all your car-related expenses for the year including gas, oil changes, repairs, tires, insurance, registration, and lease payments. Next, you will multiply these amounts by the percentage of business use your vehicle had. So, if you drove 10,000 miles, spent $10,000 on repairs, tires, insurance, gas, and used the car 60% for business, you would get a $6,000 tax deduction.
Small business deductions for automotive expenses are a fantastic way for your small business to save money on your car rental subscriptions. SIXT is your go-to solution for mobility services. Download the SIXT app and unlock a world of business use car rentals. We are your trusted mobility services provider, and we have a wealth of options for securing the transportation options you need, completely on demand and available 24/7, 365 days a year, around the world.
SIXT is Your Trusted Small Business Mobility Services Partner
As one of the world’s leading mobility service providers for small businesses and corporate enterprise clients, SIXT provides an innovative global car rental subscription service matched with industry leading customer service. Our reasonable and affordable rates on premium vehicles make it much easier for your company to design a rental subscription with high-class premium vehicles more cost effective than you might imagine.
Our broad international fleet of rental solutions includes compact cars, premium sedans, family minivans, full-size SUVs, sports cars and nearly every type of car available. Many of our branches also provide a large range of trucks and utility vehicles for more rugged commercial applications. If you are searching for a small business mobility services partner, be sure to check out one of our friendly and modern orange branches.
SIXT: From Taxi Services to Tax Expense Advice
SIXT is proud to offer car rentals alongside other mobility service solutions such as taxi services, carpooling, and chauffeur services via the industry leading SIXT app. Sign up and start saving on business use car rentals today. Our flexible rental subscription service empowers small businesses to make use of business cars in a way that is convenient and affordable. Design a rental subscription plan that matches your needs and expectations.