Key Small Business Tax Deductions in USA

Startup ExpensesCosts associated with starting up your business, such as registration, staffing, inventory purchases, and office setup, are considered capital expenses and can be amortized over several years.These are initial expenses incurred when launching a business, including legal fees for incorporation, hiring employees, purchasing inventory, and setting up office space. These costs are treated as capital investments and can be deducted over time rather than in a single year.
Business and Office SuppliesItems used exclusively for your business, such as office furniture and stationery, are deductible. However, items expected to last more than a year should be listed under depreciation.This category includes tangible assets necessary for business operations, like desks, chairs, pens, and paper. While some supplies are deductible immediately, others are considered long-term assets and must be depreciated over their useful lives.
Software, Electronics, and Online AppsNecessary business software and apps, including accounting software and online subscriptions used for business, are deductible.Expenses related to purchasing or subscribing to software programs, electronic devices, and online applications essential for business operations can be deducted in the year they are incurred.
Domain Registration and Web HostingCosts related to your business website, including domain registration and hosting fees, are tax-deductible.This covers expenses associated with establishing and maintaining a business website, such as registering a domain name and paying for hosting services, which are considered necessary for business operations and are therefore deductible.
Home Office DeductionFor business operations conducted from home, certain criteria must be met for this deduction, including regular and exclusive use of the space for business.If you use a portion of your home exclusively for business purposes, you may be eligible to deduct expenses related to that space, including utilities, insurance, and repairs, based on the percentage of your home used for business.
Business Property RentRent for office spaces or other business-related premises is deductible.If you lease office space or other business facilities, the rent paid can generally be deducted as a business expense.
Depreciation on Equipment and MachineryThe cost of equipment can be depreciated over several years, with options like Section 179 deduction and bonus depreciation available.Equipment and machinery used in business operations can be deducted over time through depreciation, allowing for a portion of the cost to be deducted each year according to IRS guidelines.
Utilities, Phone, and InternetNecessary utilities for business premises are deductible. For home offices, only the portion used for business is deductible.Expenses for utilities such as electricity, gas, water, phone, and internet service related to business activities can be deducted, but for home offices, only the portion used exclusively for business purposes qualifies for deduction.
Cleaning Services and SuppliesCleaning costs for business premises are deductible. For home offices, only the business portion of the expenses is deductible.Expenses incurred for cleaning and maintenance services necessary to keep business premises in proper condition are deductible, while for home offices, only the portion attributable to business use can be deducted.
Repairs and MaintenanceCosts for repairs and maintenance directly related to business operations are deductible.Expenses for repairing and maintaining business property or equipment to keep it in operating condition are deductible as ordinary and necessary business expenses.
Vehicle ExpensesBusiness use of vehicles can be deducted using the standard mileage rate or actual expenses method.If you use a vehicle for business purposes, you can deduct expenses such as gas, maintenance, insurance, and depreciation, either by using the standard mileage rate or by itemizing actual expenses.
Salaries and Contracted LaborWages paid to employees and payments to contractors are deductible.The salaries and wages paid to employees, as well as payments made to contractors or freelancers for services rendered, are deductible as ordinary and necessary business expenses.
Fringe BenefitsEmployee benefits like health insurance, retirement plans, and educational assistance are deductible.The cost of providing fringe benefits to employees, such as health insurance premiums, contributions to retirement plans, and tuition assistance programs, is generally deductible as a business expense.
Business Meals and Entertainment50% of business meal expenses are typically deductible.Expenses for business-related meals and entertainment are generally deductible up to 50% of the total cost, subject to certain restrictions and documentation requirements imposed by the IRS.
Professional Services and FeesFees for professional services like legal or accounting are deductible.Payments made to attorneys, accountants, consultants, and other professionals for services directly related to the operation of the business are deductible as ordinary and necessary business expenses.
Interest and Bank FeesBusiness-related interest and bank fees are deductible.Interest on business loans, bank charges, and other financing fees incurred in the course of business operations are deductible as business expenses.
Licenses and TaxesVarious business-related taxes and licenses are deductible.Business taxes, such as income tax, property tax, sales tax, and licenses required for operation, are deductible as ordinary and necessary expenses.
Bad DebtBad debts that were previously recorded as income can be deducted.If your business experiences bad debts from unpaid invoices or loans, you can deduct them as business expenses, provided you have previously included the amount in your income.
Business InsuranceInsurance premiums related to the business are deductible.Premiums paid for insurance coverage necessary for protecting business assets, property, liability, and employees are generally deductible as business expenses.
Cost of Goods SoldCosts associated with manufacturing or purchasing products for resale are deductible.The cost of goods sold (COGS), including the direct costs of producing or purchasing inventory sold during the tax year, is deductible from business income to determine gross profit.
Qualified Business IncomeUnder certain conditions, a portion of business income may be deductible.The Tax Cuts and Jobs Act introduced a new deduction for pass-through businesses, allowing eligible taxpayers to deduct up to 20% of their qualified business income (QBI), subject to various limitations and phase-out thresholds.
Travel ExpensesBusiness travel expenses are deductible.Expenses related to business travel, including transportation, lodging, meals, and incidental expenses, are generally deductible if they are ordinary and necessary for business purposes.
Advertising and MarketingCosts for advertising and marketing are deductible.Expenses incurred for advertising, promotion, and marketing activities aimed at attracting customers and generating revenue for the business are deductible as ordinary and necessary business expenses.
Shipping Costs and PostageShipping and postage for business purposes are deductible.Expenses for shipping goods to customers, as well as postage costs for mailing business-related correspondence and packages, are deductible as ordinary and necessary business expenses.
Memberships and SubscriptionsFees for professional memberships and business-related publications are deductible.Membership dues paid to professional organizations and subscriptions to trade publications directly

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