4 Tax Deductions First-Time Business Owners Need to Know

Quarter four is well underway. The air is colder, the days are shorter, and the holidays are right around the corner. For many, it’s the most wonderful time of year. For new business owners, however, it can be a confusing time filled with receipt filing, questions about deductions, and how much you can write off. If you’re new to being an entrepreneur, you’re probably asking yourself questions like:

• “Are my records in order?”
• “How much should I put back for taxes?”
• “Does my new business qualify for deductions?
• “What deductions does my new business qualify for?”

From both a business and personal standpoint, there’s a lot to juggle when November rolls around. That’s especially true if it’s your first year as a small business owner. To save you some time and stress, here are four tax deductions that every new business owner should consider.

1. Car-Related Expenses

Do you use your car exclusively for work? If so, you can write off most, if not all, expenses that you paid to operate and maintain your vehicle. If you use your car for a mix of personal and business purposes, you can only write off expenses that are related to your new business. Be sure you’re keeping detailed records of when you use your automobile for work needs or for personal use. You have two options when it comes to writing off mileage for work:

• Deduct exactly how many miles you drove for business reasons
• Use the standard mileage rate, which is set annually

If you’re unsure which route best suits your interest, it’s always wise to talk with a trusted tax professional.

2. Expenses for Your Home Office

The COVID-19 pandemic had far-reaching effects on the business world. One of the more prevalent changes that spawned during lockdowns was the normalization of working from home and, by proxy, the explosion of home offices. The IRS’ new simplified guidelines for home offices state that new business owners (and experienced ones, too) can write off $5 for every square foot of the home that’s used for business reasons, up to 300 square feet. To qualify for a deduction, the square footage you’re using can only be used for work. In other words, you can’t include the square footage of your living room just because you check email on the couch.

Integrated Accounting & Tax Pro Tip: To get a home office write-off, your home office must also be the primary place where you conduct business.

3. Internet and Phone Expenses

Whether you just formed your LLC or have been doing business for years, you often use an internet connection and your phone throughout the day. You can write off these expenses if both are crucial to running your business. However, you can only write off a portion of your phone and internet bill if you use those services for a mix of work and play.

4. Food

Everyone’s got to eat, and if you’re like most new business owners, you’re taking a working lunch. While that might not be good for your stress levels, it’s good for tax purposes. That’s because you can write off as much as 50% of business meals that qualify. In order to get the deduction, try to keep a record of the meal. Include info like:

• Location and date of the business meal
• If you dined with others, note the nature of the business relationship you have with the people you ate with
• How much you paid for your meal, with the tip included

Integrated Accounting & Tax Pro Tip: Be sure to keep the receipt you get once you pay for your business meal. If there were important details of your business meal, like who was there, you can jot some notes on the back of your receipt.

Your Premier Choice for New Business Owner Tax Guidance and Preparation

Integrated Accounting & Tax, LLC is a woman-owned accounting firm with services tailored to each client’s unique needs and goals. We guarantee that every service we provide is essential and propels your goal – even if you’re just starting out as a business owner.

Contact us today for a free tax services consultation. We have locations in Prior Lake, MN, and Ft. Lauderdale, FL, and can provide service to surrounding areas.