Top Small Business Tax Deductions for 2023

Top Small Business Tax Deductions:

1. Advertising.

If your business spends money on advertising and promotion, make sure you keep track of these expenses. The IRS allows you to deduct almost all advertising expenses.

2. Business Insurance.

Most businesses have some kind of liability insurance, and some even require specialized insurance based on the industry that they are in. These insurance costs are essentially a mandatory cost of doing business, so you are able to deduct them from your taxes.

3. Vehicles.

Whether you use your own personal car or your business owns a fleet of vehicles, these costs are tax-deductible. Deductions include repairs and fuel costs, but only a portion of these costs are eligible if the vehicle is also kept for personal use.

4. Capital Expenses.

Capital expenses are incurred when your business purchases new equipment or assets. There are limits to the amount that you can write off as a capital expense each year. For example, if your business purchases a new property, you may be able to write off the cost of the purchase over the course of several years, but you cannot deduct the full value all at once because your business will not get the full use out of the property in that year alone.

5. Cost of Goods Sold.

To offset the money that you earned from the sale of goods, you can deduct the initial amount that it cost you to acquire those goods. This will demonstrate the difference between your gross profit and your net profit, lowering your taxable income.

6. Employee Wages.

If you have employees, you can deduct the wage or salary that you pay to each one of them. However, if you hire contractors or freelancers, you cannot deduct these costs because they are not truly employees of your business.

7. Health Insurance Premiums.

Does your business provide a group health insurance plan to its employees? In some circumstances, the contributions that your business makes are deductible. To qualify for this small business deduction, you must have 25 employees or less.

8. Home Office Costs.

Working from home is common for self-employed people. Besides a short commute to work, a further benefit of working from home is that you can write off a portion of your home office expenses. If you can demonstrate that your home is your primary place of business, you can deduct things like your electricity and your mortgage payment (in part) from your earnings.

9. Rent.

Many businesses rent office space or warehouse facilities and pay a monthly fee for their occupancy. This is another cost of doing business that can be deducted at tax time.

10. Utilities.

To keep your business going, you need basic things like running water, electricity, heat, internet, etc. Your utility costs are deductible so long as these costs are being used for the operation of the business.