It’s that time of year for small business owners. You are getting started on 2019 and gathering receipts from 2018! The easiest way to reduce your income tax bill is to make sure you are claiming all tax deductions available to your business.

We wanted to make sure you didn’t miss anything, so have put together The Ultimate List of Small Business Deductions For Reducing Your Income Tax Bill:

*Note that some deductions we outline may not be available to your business. We recommend you speak with a CPA/tax advisor before making deduction claims.

1. Advertising and promotion

Marketing your business is 100% deductible! This includes things like printing, online ads, email marketing, events, and more.

2. Business meals

For meals to qualify as a deduction, they must be business related. As the business owner, you must keep track of the date/place of the meal, the amount of the expense, and who the person you dined with was – what is their relationship to your business? We recommend noting this on the back of the receipt so you can refer to it later.

You can deduct 50% of qualifying business meals.

3. Business insurance

Business insurance is deductible. If you have a home office, you can also deduct the cost of your insurance as a part of your home office deduction.

4. Business interest and bank fees

If you borrow money from the bank for your business, you can deduct the interest you are charged on the money owed. You can also deduct the interest owed on business credit cards.

Bank fees and bank charges are also deductible.

Keep in mind that is the loan is a personal loan and not a business loan, it is not tax deductible.

5. Business use of your car

If you use your vehicle solely for business purposes, the entire cost of operation of the vehicle is deductible. If it is used for both business and personal, the business related usage is deductible but the personal usage is not.

You can also deduct a new vehicle purchase on your return. Consult with your CPA regarding your purchase to explore the amount that is deductible for your vehicle type.

When claiming mileage, there is a standard mileage deduction. You can deduct your actual costs, or use the standard. Even if your actual costs are less than the standard rate, you can still use it.

6. Charitable contributions

If you made a charitable contribution to a qualified organisation, it is deductible.

7. Child and dependent care expenses

Child care or dependant person care is deductible. This is for children under the age of 12 or a spouse who is physically or mentally incapable of self-care.

8. Education

Education and courses are deductible if they add value to your business and increase your expertise. The IRS will look at whether the expense maintains or improves skills that you require for your business. This includes:

  • Classes
  • Seminars and webinars
  • Subscriptions
  • Books
  • Workshops

9. Energy efficiency property expenses

Energy efficient upgrades to your home may qualify for tax credits. Examples include solar hot water heaters, solar electric equipment, and wind turbines.

10. Home office

For your home office, you are able to deduct $5 per square foot if it is used for your business, up to a 300 square foot maximum.

11. Legal and professional fees

If a legal or professional fee is related to running your business, it is deductible. These are fees charged but lawyers, accountants, and even bookkeeepers like us!

12. Medical care expenses

You can deduct medical care such doctor’s fees, prescription drugs, and homecare. You can also deduct health insurance costs if you pay for your own health insurance, as well as health insurance for your spouse or dependants.

13. Mortgage interest paid

The interest you pay on mortgage loans to buy, build, or improve your home are tax deductible.

14. Moving expenses

Moving expenses are fully deductible if the main reason for the move is work. You also need to meet the distance test and the time test.

To pass the distance test, your new main job location needs to be at least 50 miles farther from your former home than your old main job location was from your former home.
To pass the time test, you need to work full-time for at least 39 weeks (about 10 months) during the first 12 months, and for at least 78 weeks (about 18 months) during the first 24 months that you live in your new job location area.

If you are moving for work purposes, then moving expenses are deductible. Both distance and time are taken into consideration:

Distance – your job location need to be 50 miles further from your previous home than your new home.

Time- You need to work about 10 months during the first 12 months and about 18 months in the first 24 months that you live in your new.

15. Retirement contributions

IRA Contributions can help reduce your taxable income for the year.

16. Salaries and benefits

Salaries, benefits, and vacation time paid to workers are deductible if the worker is an employee and not a independent contractor, sole proprietor, partner or LLC member. Their salary also must be deemed reasonable, and they must have followed through on providing the services required for their job to the company.

17. Telephone and internet expenses

Phone and internet are deductible, but only the percentage of cost of these expenses that was used for business. We recommend keeping a record to prove business use vs. personal use.

18. Travel expenses

Business travel must be away from the city you work in and require you to be away for more than 1 day and require you to sleep away from home.

  • Travel to and from home by plane, train, bus, or car
  • Travel for getting around at your destination (use of your car or a rental)
  • Parking fees
  • Taxi, Uber, and other forms of transportation while away
  • Food, beverage, hotel, Airbnb
  • Dry cleaning while away
  • Shipping of baggage