Tax Deductions Every Business Owner Should Know About
Almost every business owner is aware of the standard deductions they can claim on their annual tax return. But are you taking advantage of all the deductions available to you? From vehicle expenses to meals and entertainment, there are a number of tax breaks available to business owners that can save you hundreds or even thousands of dollars.
This post takes a look at some of the most common tax deductions business owners should be aware of. So whether you're just starting out in business or looking for ways to reduce your taxable income, read on for more information about the deductions available to you.
If you use your personal vehicle for business purposes, you can claim a deduction for the expenses incurred. This includes fuel, maintenance, and insurance costs. The deductions available will depend on how you use your vehicle and how many miles you travel for work each year.
To claim this deduction, you will need to keep accurate records of your vehicle usage, including a log book or similar documentation.
If you have any questions about claiming vehicle expenses, speak to your accountant or bookkeeper. They will be able to advise you on the best way to claim these deductions and ensure you are correctly recording all the necessary information.
Meal and Entertainment Expenses
Business owners can often deduct the cost of business-related meals and entertainment. This includes expenses such as business lunches, client dinners, and tickets to sporting events or shows.
Usually, these expenses must be directly related to the conduct of business and you must have a reasonable expectation of deriving income from the meeting. For example, if you entertain a potential client, you should have a record of the meeting and the business discussed. Include things like the date, time, venue, and names of those in attendance.
Note that entertainment expenses cannot be claimed as a deduction if they are considered to be "lavish or extravagant." In fact, the deduction is only available for the cost of the food and drink, not for any other expenses incurred.
For example, if you take a client to a baseball game, you can only deduct the cost of the food and drinks, not the cost of the tickets. So, if you're planning on entertaining clients or business associates, be sure to keep the event modest.
As with vehicle expenses, you need to keep accurate records of your meal and entertainment expenses. This includes receipts, invoices, or similar documentation. Bookkeeping services can help you track these expenses and ensure you are correctly recording all the necessary information.