10 Everyday Business Purchases That Are Tax-Deductible

Even if everything is filed and squared away, as a business owner we know you understand the importance of staying on top of your taxes and paperwork. We also know business owners enjoy finding ways to save money when possible. That’s why it’s important to recognize which business purchases are tax-deductible. We want you to focus on growing your business instead of poring over tax code, so we made this handy list of common tax-deductible purchases!

In this blog, discover 10 everyday business purchases that are tax-deductible, and how you can get the most out of your deductions every single year.

Are tax deductions even worth the effort?

When you know the basics of tax deductions and what purchases are deductible, your small business saves money. Plus, you become a smarter, more knowledgeable business owner! Our team here at Chaliff + Associates knows all the tricks of the trade, and we’re excited to put our years of experience to work for you. That’s why we put together this list of 10 tax-deductible purchases and expenses for your small business. Keep in mind that some of these deductions will only apply to certain business classifications, such as LLCs or sole proprietorships, for example. For more clarification, contact a dedicated CPA.

COST OF GOODS SOLD

Does your business depend on producing and selling a consumable product to your customer? If yes, then good news! You can deduct the cost of goods sold. It’s important to note that you must track your incoming and outgoing inventory from the beginning to the end of the year. There can be no gaps. If you have data missing, you will be unable to properly calculate your cost of goods sold during a taxable year of business.

Examples of costs of goods sold include, but are not limited to:

• Storage expenses related to raw materials, WIP (work in progress), or finished goods
• Direct labor costs
• Ingredients or raw materials

POWER, WATER, AND MORE ARE FULLY DEDUCTIBLE!

The checks you write each month to keep the lights on and water running can all be deducted from your taxes to save you some money year over year. Business utilities are fully deductible for your business location, but not if you work out of your house. Only a portion of your home utilities are deductible if you have a home office.

Key Tip:

Keep all of your utility bills in a simple and organized system. Better yet, scan and digitize your bills. Then, create a similarly simple and organized digital system. Some businesses like to do it their own way, which is fine. But just make sure your way of organizing is clear, direct, and replicable. That way if someone else has to pop in and help or you change CPAs, everything is laid out and organized!

INSURANCE IS A DEDUCTIBLE MUST

Smart businesses carry business insurance. Common insurance policies, such as owner health insurance, owner policies, property, liability, and worker’s compensation insurance may be 100% tax deductible, but this varies based on your business’s classification.

For example, owner health insurance is only 100% deductible for corporations. S corps, LLCs, and sole proprietors are limited to earned income, and unfortunately owner health insurance is not deductible for self-employment purposes. So, if these deductions apply for your business classification, we encourage you to take advantage!

MOST BUSINESSES PAY DEDUCTIBLE RENT

If you’re renting office space or a storefront for retail, you can deduct your monthly rental payments! If you run a business from the comfort of your own home, a portion of your rent-associated expenses may be deductible.

PLANES, TRAINS, AND AUTOMOBILES

We mentioned careful documentation and organization are key with utility bill deductions. It’s even more important with automotive expense deductions. You must have documented records that validate that the automobile is used primarily for business.

And here's the bit that can be really challenging: keeping track of your miles. It's easy to forget to keep a close eye on this. But the closer you do, the more you can deduct from your taxes.

This can be a bit more complicated if you use your automobile for both business and personal use. Contact your CPA for more details about what you need to do in that situation.

PAPER, PENS, AND MORE!

The stuff you need to do the work that pays the bills? Those costs add up too. You’d be surprised how much money you spend per year on small but necessary items for your small business. Thankfully, it’s tax deductible. Fun fact: furniture is considered office supplies if less than $500 per item (otherwise, it’s considered a capitalized asset). Deduct away!

SAAS PAYMENTS? TOTALLY DEDUCTIBLE.

Software as a service, or SaaS, is the standard for the software we use in everyday business now. Payment services, communication tools, media streaming, tracking, or creative software that requires a monthly or annual subscription are deductible from your taxes as a small business expense.

PHYSICAL AND DIGITAL MARKETING

Did you know that your paid marketing efforts are tax deductible? It’s true! That logo, content, or strategy you paid for earlier in the year is entirely tax deductible.

Just remember, as with most of these examples, to keep a clear and documented history of services rendered and paid for.

Make sure the contractor or agency you worked with does too!

INTERESTED IN INTEREST DEDUCTIONS?

Working capital is the backbone of any small business, and when you’re getting started, that capital often comes in the form of a business loan. As long as your small business loan covers business expenses, the interest you pay on that loan is tax-deductible.

EDUCATION

A culture of education is important in any growing small business. It’s also a write-off. The stipulation here is that education must improve skills or maintain knowledge.

Educational expenses include but are not limited to:

• Conferences
• Literature specific to internal systems or general industry
• Courses related to your industry
• Webinars

HOW TO CLAIM SMALL BUSINESS TAX DEDUCTIONS ACCURATELY

If you’re ready to start claiming small business tax deductions, the single most important step you can take is choosing the right CPA to handle your finances. Working with a trusted tax professional is a surefire way to keep accurate records and claim the maximum amount of the tax deductions you need to save money and grow.

We understand it can be scary to hand your business finances over to a stranger. When you partner with us, you can leave worry behind and know that your security and privacy are our top priority.

Don’t let staying on top of your books get in the way of growing your business. That right there is why over 300 successful businesses turn to Chaliff + Associates CPAs for their bookkeeping, accounting, and tax needs. Request a complimentary consultation with our accounting experts today.

Let us take care of the numbers. You have a business to grow.