When you’re an up-and-coming entrepreneur, you naturally focus on improving your bottom line, and believe or not, tax time offers you opportunities to do just that. While you can’t avoid paying taxes completely, there are numerous deductions you can take to hold onto more of your hard-earned cash. Grab your accounting books, gather up your receipts, and make sure that haven’t missed these four money-saving deductions.
Take Advantage of the Capital Expenditure Deduction
If you purchased new computers, software, vehicles, or manufacturing equipment in 2013, you may be in for a pleasant surprise. As part of the fiscal cliff deal in January 2013, Congress extended the Section 179 Deduction, which allows small business owners to deduct up to $500,000 in qualified capital expenditures. In 2014, the annual deduction amount drops to $25,000.
Deduct All Necessary Expenses
Any ordinary expense that’s necessary for your company’s operation can usually be deducted as a business expense. This not only includes obvious expenses like office supplies, telephone charges, and mileage, but also things like licensing fees and trade organization dues. Just be sure to save all your receipts so you have the documentation to prove the necessity of your purchases.
In the past, you needed to list every expenditure when claiming the deduction for home office expenses. In 2013, the IRS introduced a simplified method based on your home office square footage. You can write off five bucks for each square foot, up to maximum of $1,500. If you’re claiming depreciation on office equipment, however, you’ll likely save more by using the traditional calculating method.
Interest Deductions on Business Loans
If you took out a personal loan to fund your business venture, you can deduct the interest and carrying charges from your taxable profit. The fees and charges are deductible on credit card purchases too, as long as you can demonstrate that the purchase was for business purposes only.