Tax Savings for Entrepreneurs: A Deep Dive into Small Business Deductions.

Starting a business can be an exhilarating feeling, the rush of entrepreneurship and the eagerness to provide value to potential clients brings a new level of excitement. Every entrepreneur has experienced this feeling, the highs are high, and the lows are low, but that never stopped them from tackling the mountainous odds that are stacked against them each and every day.

There is a saying, “the biggest expense for a business are taxes”, yes that is accurate, regardless if you are setup (for tax purposes) as a sole proprietor, a Single Member Limited Liability Company (“SMLLC”), Multi-member LLC (“Partnership”), S-Corporation or C-Corporation. The dollar amount that is paid towards taxes, lessens the amount that could be reinvested into your business.

To reduce taxable income, the Internal Revenue Code, specifically §162, allows the deduction of all ordinary and necessary expenses paid (or incurred) during the taxable year. What is “Ordinary and Necessary?” A vague yet often favorited response amongst the tax community is “it depends”.

A good rule of thumb is, the dollars spent to generate revenue for your business are more likely than not going to be allowed as a deduction, with the occasional caveat such as a meals, entertainment, and depreciation of certain assets. This goes without saying that appropriate bookkeeping, and recordkeeping is a must in order to substantiate said deductions.

Below is a general, non-exhaustive. list of expenses that are available to taxpayers:

Salaries and Wages	Payroll and Other Taxes
Licensing Fees	Rent/Lease (Office Space/Equipment)
Office Expenses	Supplies
Inventory/Materials Purchased	Travel
Advertising/Marketing	Commissions/Fees
Contract Labor	Employee Benefits Programs
Insurance (Business/Workers Comps)	Health Insurance Premiums
Interest	Legal & Professional Services
Auto Expenses	Repairs and Maintenance
Utilities	Other Expenses

If you have specific questions related to your business and tax planning needs, Boston Tax Advisors can help!