Whether you have been crunching numbers with your accountant or realized you could start a small business by other means, the right time could be now. Here, review what tax advantages you’ll enjoy as a small business owner. The more you know about the tax breaks that apply to you, the easier planning your grand opening will be.
4 Tax Breaks Starting a New Business Provides
1. Startup Capital Expenses
You may have to spend money to make money, but some startup funds provide tax write-offs. If startup capital expenses such as renting a commercial space, paying for a marketing campaign, training employees, buying inventory, and obtaining necessary permits are less than $50,000, you can deduct $10,000 in business and organizational costs. If costs exceed $55,000, the deduction does not apply.
2. Home Office Deduction
Perhaps your home provides your new company’s current headquarters. If you use a home office routinely throughout the tax year, deduct a percentage of your rent or mortgage from your taxes. The home office deduction requires measuring the space’s square footage compared to the rest of your home. Divide the office square footage from the total house square footage to determine the percentage you can deduct.
3. Inventory Write-Offs
If the business involves selling products, write off their cost once you sell them. Your accountant will help you list inventory for IRS identification and assist in deducting damaged merchandise that wasn’t sold. The IRS requires explanations regarding how the inventory was damaged.
4. Business Insurance Breaks
Business coverage premiums offer tax deductions because they are considered operating expenses. Depending on the operation, it may be possible to write off premiums for various insurance policies, including premise liability, fire, worker’s compensation, theft, flood, business interruption, malpractice, and life insurance. Other potential deductions include credit insurance covering business debt losses.
Discuss these and other tax advantages available to your startup with the accountants at Demshar Eaton CPA. This full-service accounting firm has served Ashtabula, Geneva, Conneaut, and the surrounding areas in Ohio since 1978, providing customized solutions that include payroll, bookkeeping, and tax preparation. Call (440) 992-6622 today to make an appointment, or learn more about the accountants online. Get their latest tax and accounting tips on Facebook.