New business owners often love the freedom and sense of empowerment that comes from building something themselves, but the tax burden can often be surprising. Fortunately, the IRS provides substantial breaks for business owners, although you may have to engage in year-round tax planning to maximize the benefits. Below are a few deductions that could shave thousands of dollars off your bill at the end of the year.

3 Common Deductions for Business Owners

1. 20% Deduction for Pass-Through Entities

If you’re organized as a single-member LLC, sole proprietorship, or other pass-through entity, the Tax Cuts and Jobs Act introduced a deduction that could slash your liability. Under the new rules, owners of pass-throughs can deduct 20% of your Qualified Business Income. Some industries are excluded from this deduction, and there are income thresholds, so speak to a tax planning professional to ensure your business qualifies.

2. Home Office Deduction

Starting a small business in your home is a great way to keep expenses down, and it also allows you to write off part of your rent or mortgage, utility expenses, and other costs. To qualify for the home office deduction, you must have a space dedicated solely to work, although it doesn’t have to be an entire room. You may also be ineligible for this deduction if you also have a commercial location from which you regularly do business.

3. Equipment & Software Deduction

If you’re still building your business, you may be planning to invest in some new equipment, computer software, or other high-value assets. Fortunately, most small businesses can fully deduct those purchases the same year they were made, instead of writing them off over time. However, the amount you can deduct is capped, so you may want to talk to a tax planning expert when planning future purchases.

For over 40 years, Texarkana business owners have relied on Young Hoy & Burnett CPA to help minimize their tax burdens and the stress of managing the finances. Their experienced accountants offer a broad range of services every business owner needs, from strategic tax planning to return preparation and daily bookkeeping services. Visit their website for an overview of their services, call (903) 794-2211 to find out how they can help, and follow their Facebook for more financial and accounting tips.