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Understanding Small Business Tax Deductions

Small Business Tax Deductions


Disclaimer: No tax advice, no legal advice, no financial advice.

Many people who have a small business or home-based business aren’t getting the deductions that they deserve. While it’s always important to follow tax laws closely, there are many small or home business tax deductions that are forgotten. To get the most from a business, make sure to include these deductions. 

tax deduction

Home Offices

A home office deduction is often left off the list, but be sure to include this deduction in taxes. The key to using this deduction is making sure that the home office is a space in the home devoted to just the business and nothing else. A family den, for example, won’t work in this way. However, the deduction doesn’t have to be limited to an entire room. A home office can even be part of a room. To get a realistic deduction, measure the work area and divide this number by the square footage of the home. That percentage can be used to determine which living expenses such as rent, mortgage, insurance, and electricity can be claimed. 


When office supplies comprise more than just basic pens and paper, be sure to deduct these expenses as well. A tax deduction can include office furniture in a few main ways. Deduct either the entire cost of the furniture purchased or a portion of the expense over seven years, which is known as depreciation. When unsure of which way to do this deduction, anticipate which times the small business is going to need these deductions the most. Other equipment such as computers, fax machines, scanners, and similar items can be deducted the same way although this equipment has a five-year depreciation period


For small businesses, driving is an expense that is deductible, but most people wouldn’t recognize it as such. To save money on gas, keep a notebook in a vehicle and record the date, mileage, any tolls or parking costs, and the purpose of the trip. At the end of the year, add up the costs and use this as a small business tax deduction. Or, if desired, measure the business usage against personal driving and deduct that portion of any auto-related expenses including gas, repairs, and insurance. If leasing, be sure to include those payments or factor in loans if purchasing. And, if the company’s office is at home, small businesses get even more of a break. In this case, deduct the entire business-related mileage from leaving the driveway until returning home. However, if the business is not home-based, the mileage meter starts at the first business-related destination and will end at the last. 

Child Labor

For many people who have a small business or a home-based business, their kids play a significant role in the work force. When limited childcare is available, kids are even more of part of that business. If they are paid for their work, then, depending on the amount, they may be able to avoid income taxes. Also, there is no social security tax when the child is 17 or younger and their salary can be deducted as a business expense. However, this small business tax deduction is only available when you or you and your spouse are the only partners. If the business is run as a corporation, then this will not be an option. 

Insurance Premiums

For small businesses where many of the owners are self-employed, it’s common to be paying for your own health insurance premiums. However, the entire amount of these costs are deductible. However, keep in mind that there are some limits to this deduction. It cannot be more than the net profit of the business and it won’t be allowed if you were deemed eligible for other healthcare coverage, such as the coverage offered by an employed spouse’s plan. However, this deduction can be significant for a small or home-based business. Additionally, some of the premiums paid for long-term care insurance are also deductible, so be sure to count these expenses in a tax return. 

Many small business owners don’t realize that they can save a significant amount of money on their yearly taxes. These small business tax deductions tend to be even greater for a home-based business, so they’re well worth any extra time or effort preparing yearly tax returns. Be sure to both document these expenses and claim them correctly to get the most from each deductible expense.

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Limited Childcare

Consequences of Limited Childcare and how to avoid them

Childcare, including daycare and preschool, is often seen as a sort of necessary evil. No parent wants their child to be with strangers, but at the same time, living expenses require that at least one parent hold down a job, and in many cases it takes both parents working to put food on the table. In some ways childcare only adds to the problems a family is facing, however, because it creates yet another cost. In fact, some childcare facilities charge up to fifteen thousand a year. That’s the equivalent of a year’s salary earning minimum wage. Fortunately you can file childcare as one of your small business tax deductions, provided that you can prove your caretaker is qualified.

Not to mention the fact that childcare requires parents to put their trust in an administration to maintain their children’s wellbeing. Yet six out of ten children spend part of their time in childcare.

For these reasons, if none other, it is important to find the right childcare solution. Parents need responsible, friendly childcare providers, but they also need them cheaply. These seemingly opposed requirements make it somewhat difficult to find the ideal childcare provider. To make matters worse, many families are so busy it’s simply not realistic for them to do the research required to find the ideal candidate.

It is families who find themselves in these situations who benefit the most from a kind of limited childcare. There are three kinds of limited childcare which are commonly used in America. Each has its own positives and negatives.

The first is center-based care. This is the method by which you leave a child at a center designed for childcare and pick them up later. The upside to this kind of daycare is that the caretakers are usually specialists and the facility is designed with children in mind. They will often have movies, toys, and games to keep your children entertained. These centers are generally filled with other children as well, so your child is not likely to feel lonely.

The downside to this kind of limited childcare is that these centers are facilities and your children will have multiple caretakers, who may be stressed and tired from working with children all day. Assuming that they are able to maintain their composure around your children, they are still less likely to give your children the focused attention they need and desire. If you have to go in early or stay late at work there may be issues or additional fees as well, since as a facility, the center will also have an opening and closing time.

The other two types of limited childcare involve private caretakers, and as such have a much greater range than the first. While you can be reasonably certain that the caretakers at a center are drug tested for instance, the same thing isn’t necessarily true regarding private caretakers.

There are two types of private caretakers. Those who come to your home, and those who watch your child in their own homes. The advantage to having a caretaker come to your home should be fairly obvious. As your home is a place of comfort your child they will likely be far more comfortable at home with their things than away at someone else’s house. There is a price difference between caretakers who come to your home and caretakers who stay in theirs but depending on how far you would need to drive to drop your child off, you may save money on gas by going this route.

The final method, which involves leaving your child at the caretaker’s home can work, although there can also be issues involved. Many caretakers who work from home have children of their own. This is great if your child gets along with the caretaker’s as it means your child will have a friend to play with every day. However, nothing guarantees that your child will get along with the caretaker’s children, and the caretaker is likely to feel a bias towards their own children. This brings up the ultimate issue with both kinds of private limited childcare. There aren’t any overseers or other policyholders to govern how they behave, and so you have to put more trust in them to behave themselves. Even assuming the caretaker is able to act in a professional manner, there is something potentially disconcerting about taking your child and giving him or her to another parent who is able to stay home and take care of their own children.

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How to Effectively Cut Back On Living Expenses

Cut Back On Living Expenses!


With the cost of living sky rocketing due to the current economic turmoil, everyone is looking for ways to reduce on their expenditure and lower their living expenses.

2014-09-26 living expenses

This has necessitated individuals to cut back on their regular budgets. Some of the ways one can effectively cut back on their budgets are discussed below.

Transport expenses

Moving around can be costly especially if one has to travel every day to our work .There are several ways one can cut back on transport costs. If you own a car, it will be advisable to begin using public transport and only use your vehicle when it is extremely necessary. Using public transport will save money on gas, parking tickets and regular vehicle maintenance.

If you have friends in your neighborhood, you can carpool. Carpooling is sharing a ride in your friend’s car and diving the fuel expense amongst the users. This is very cheap as if you are four friends, you will only pay a quarter of the fuel expense.

If you have your vehicle parked on the drive way or garage and you do not use it, it is advisable to sell it or rent it out. This will help you pay insurance costs that you would still be obliged to pay whether you use the car or not.

Child expenses

If you have children, you are likely to spend a lot on child care. Look for affordable and less expensive child care options where you can enroll your children. If none is available near your area, you can use a limited childcare center which is close to your workplace.

Energy utilities

According to US labor department, energy related bills increase living expenses as they usually account for one fifth of the average American salary. There are several ways one can take to reduce their monthly energy bills. Make sure you unplug any electronic devices that you are not using. The US department of energy states that between 5-10 {8376195f3e11fe7b79595fd7996b9c81f861524e2a126880dfd577a3d56818a3} of all energy consumption is consumed by plugged in devices.

Installing ecofriendly and energy saving bulbs will help reduce your electricity bill. It is also important to switch off lights when you leave a room. In addition, ensure to switch of air conditioning while you are away as air conditioners is one of the biggest electricity consumer. You should also ensure that you compare your gas and electricity rates and look for a service provider that gives you the best deal.

Debt and loan reduction

Debt reduction is one of the best ways to reduce your monthly payment load. Though one might not have the cash necessary to clear their debts and loans at one go, there are several ways to effectively offload your monthly debt and loan repayments.

You can undertake refinancing of your debts. It is important to get a financial institutions that will help reduce your monthly payments without a significant increase in your overall cost. You can also undertake consolidation of your loans. These two measures will definitely free up some money that you can redirect somewhere else.

If you still have money on your credit card, you can contact your Credit Card Company and request for a credit card rate reduction. If you do not get a favorable rate, it is best to get a zero percent transfer to another is important for someone seeking to save to stop buying on credit until their financial standing is stable.

You can also undertake debt reduction by selling items you do not use or those stored in your garage. There are various online sites that you can post your items and get people willing to buy them. You can use these cash to reduce your debts and pocket some.

If you are a small scale business owner, you can get some money by claiming small business tax deduction refund. You can get refunds on your expenses from office supplies expenses, furniture, office equipment and telephone expenses

Cutting on food costs

Though it may seem convenient to eat out, it is very expensive in the long run. Try keeping your receipts and you will be shocked at the end of the month when you add the total cost. When you cook in your house, it is advisable to cook in bulk and freeze some for future use. In the workplace you can have packed lunch and thus avoiding buying food for lunch and contributing to reduction in living expenses.

You can effectively save on your food costs by reducing and eliminating eating out and ordering take outs. Use any free time to cook your own food. Cooking your own food not only ensures you eat healthy meals but will also help you improve on your cooking skills.

Entertainment expenses

One can easily save money by reducing their entertainment expenses. Cancel any club membership as clubs usually levy monthly payments. Find a free outdoor activity to replace the club activities. You can also cut back on your cable bills by subscribing to a less expensive package or eliminate cable subscription entirely.

Another effective way of reducing your living expenses is to cancel your newspaper and magazine subscriptions and by eliminating or reducing travel.

When you cut back on living expenses make sure you don’t cut back on expenses that are in the category small business tax deductions.

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Best 6 ways to Save Money on Gas

Top 6 ways to Save Money on Gas 

Maintain your vehicle

A well tuned vehicle is going to maximize its fuel efficiency. Make sure you change your filters regularly. Your engine uses 15 parts air to one part gas at sea level. This means if the air is blocked, your engine is going to have to work harder which just leads to burning fuel. Check your car manual to make sure you are using the correct motor oil. Using the wrong motor oil translates to an inefficient motor and excess fuel loss. Make sure your gas cap is airtight. If you are driving around with a broken or missing gas cap, you could be losing gas from simple evaporation. Park in the shade until you get this fixed. Clean out your car to save money on gas and put more towards your other living expenses. Every 100 lbs you have stored away in the trunk reduces your fuel efficiency by 1-2{8376195f3e11fe7b79595fd7996b9c81f861524e2a126880dfd577a3d56818a3}.

Align and fill your tires

You can save 20 cents on the gallon if you keep your tires well aligned. Poorly aligned tires will not only cause your tires to wear out prematurely, the engine has to work harder to get them spinning and your car moving. On a related note, make sure your tires are filled to their optimal psi. If your tires are a little flat, they will drag causing you to burn unnecessary fuel. Optimal PSI levels are different for every tire, but you can reference the psi levels noted the side of every tire. You lose air pressure as you drive your car, so check your air on a biweekly basis.

Limit your driving and AC

Cutting down on your driving involves more than just carpooling. Did you know that making multiple trips covering the same distance as one continuous longer trip will burn more fuel? Your car burns more fuel making multiple cold starts than when the engine is already warm. Combine your errands into one trip around town instead of spreading them out over several days. Plan your route in advance, by checking an online map for side routes that may get you where you need to go more efficiently. Turn off your air conditioner, and open your vents or windows instead to cool down. The AC is a huge fuel guzzler, especially at low speeds.

Avoid idling

Every two minutes you spend idling your car is equivalent to the amount of fuel that you would burn travelling a mile. Modern cars do not require the long warm up period that older generation cars did. Check with your car manual or local mechanic for the optimal warm up time in different weather conditions for your vehicle. It is often less than a minute. Whether you are stuck waiting for a train or waiting for someone to quickly pop in and out of a store, turn off your vehicle to save on fuel. When travelling from point A to point B, you may want to avoid routes on store front filled streets, as you will spend more time idling in your car waiting for pedestrians to pass at multiple crossings.

Pay less

Save money on gas when you fill up on gas Monday through Wednesday. Gas stations frequently jack up the prices starting on Thursday in anticipation of weekend road trips. Avoid buying your gas in affluent areas or at stations just off the highway. You are only paying for location and convenience. Fill up your gas tank every time you go, and save on miles spent making multiple trips to the gas station and idling waiting for a pump to open. If you have a smart phone, download the AAA triptik or GasBuddy app. These apps help you find the cheapest gas in your area. Get more gas for your dollar when you fill up early in the day or later in the evening. Gas is more dense when it is cool, so if you fill up your tank when it’s warm out you will get less of it. Make sure you save your receipts, you can claim gas as one of your small business tax deductions when it comes time to fill out your taxes.

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Drive smart

Excessive execrations and breaking will use more fuel than if you simply drove at a regular pace. Every 5 mph that you reduce in speed can reduce your fuel consumption by up to 7{8376195f3e11fe7b79595fd7996b9c81f861524e2a126880dfd577a3d56818a3}. Maintain a safe distance from the vehicle in front of you, so you are not forced to break as frequently. Ignore tailgaters and don’t let them pressure you into speeding up. Let them pass when it is convenient for them. Try to anticipate stops and coast towards a stop light instead of pressing on the gas all the way there and stopping abruptly. Accelerate slowly from a dead stop, and you will use less fuel than if you try to peel away.