Small Business Tax Deductions Checklist and FAQs

A bad debt happens when someone owes you money, but there is no way for you to collect it. It becomes worthless because you’ll never recoup that money. For example, a customer buys a $700 item from your store using store credit. But after repeatedly invoicing the customer with no response, their debt becomes bad. If you have bad debt included in your gross income, it can be claimed as a tax write-off to lower your business’s tax liability. Keep in mind that any education costs that would qualify you for a new career, or costs related to education outside of the realm of your business, don’t qualify as business tax deductions.

• Even if you file a joint return, you cannot file a joint Schedule SE.
• If telephone and internet services are integral to your business, they can be deductible business expenses.
• This credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities.
• Stay on top of your business taxes—download the small business tax deductions checklist below.
• It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier.
• If your return shows that you owe tax, you must pay it by the due date of your return (without regard to any extension to file) to avoid late-payment penalties and interest.
• It’s important for business owners to understand the different types of deductions and how to maximize them in order to take full advantage of tax write-offs.

Phone, internet, and office supply expenses

However, a gain or loss realized from certain exchanges of property is not recognized. Also, you cannot deduct a loss from the disposition of property held for personal use. Both the buyer and seller involved in the sale of a business must report to the IRS the allocation of the sales price among the business assets. Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. You are a calendar year taxpayer and use an accrual method of accounting.

Office Software Expenses

Use Schedule SE (Form 1040) to figure and report your SE tax. If you file Form 1040 or 1040-SR, enter the SE tax on line 4 of Schedule 2 and attach Schedule SE to your form. If you file Form 1040-SS, enter the SE tax on line 3, and attach Schedule SE to your form. You cannot use this method to report an amount less than your actual nonfarm net earnings from self-employment. Your actual nonfarm net earnings are your nonfarm net earnings figured using the regular method, explained earlier. To figure net earnings using the regular method, multiply your self-employment earnings by 92.35% (0.9235).

• With the IRS mileage rate reaching an all-time high of 70 cents per mile in 2026, accurate tracking has never been more crucial.
• However, there are some deductions you may be able to claim without a receipt.
• You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax (discussed later), of $1,000 or more when you file your return.
• To calculate the home office deduction, you will need to divide the square footage of your home office by the total square footage of your home.
• Now that you have your small business tax deductions checklist, all that’s left to do is apply it to your expenses.

Essential Small Business Tax Planning Strategies to Run a Profitable Firm

If navigating software feels overwhelming or your tax situation feels complicated, you can hire a CPA to prepare and file your taxes for you. Keep receipts, invoices, and documentation showing How to Start a Bookkeeping Business the business purpose of each expense, including dates and locations. Avoiding these mistakes ensures compliance with IRS rules and helps maximize legitimate deductions without unnecessary risks. Professional development is a great way to grow your skillset and offer more value to clients and customers.

) Office Rent or Lease vs. Home Office Deduction

• If so, please feel free to book a free consultation with us.
• As a small business owner, it can be difficult to know what deductions are relevant to you.
• This may occur if the employee’s name was changed due to marriage or divorce.
• When you keep meticulous records, it makes your life easier during tax time, and if you were ever audited, you would have proof of those expenses.
• In these categories, just $50 per week equals $2,600 in annual deductions.
• Brand-building and long-term awareness campaigns are generally treated the same as direct-response advertising for deduction purposes, as long as they truly promote your business.
• Most small businesses pay for some form of advertising or marketing to promote their business.

We work to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights. cash flow Go to IRS.gov/WMAR to track the status of Form 1040-X amended returns. You’ll need an IRS Online Account (OLA) to complete mobile-friendly forms that require signatures.

• A business bad debt is a loss from the worthlessness of a debt that was either of the following.
• If you borrow money from a financial institution to fund your small business, payments on the loan’s principle are generally not tax-deductible.
• If you spend more than $25 on a gift, you can still give it, but only $25 is deductible.
• After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit.
• The IRS sets a cents-per-mile rate each year for business driving.
• Businesses with revenue of $27 million or less can deduct 100% of their interest expenses.