Small Business Tax Deductions Checklist for 2022

If you’re a small business owner, you look for every tax deduction you can take when it comes time to pay Uncle Sam. Which means rent, inventory, equipment depreciation, business miles—right? Unless some of those deductions are now ineligible, while others may have been added or changed of course.

Tax deductions can be a time-consuming, complicated process, and it’s not like you don’t have anything else to do!Never fear—we are bringing you the small business tax deduction checklist for 2022.

How can a small business reduce taxable income?

The IRS allows small businesses tax deductions that are both ‘ordinary and necessary.’ This means they must be common expenses for the industry you’re in and necessary for your particular business. What exactly might these be? Let’s gather up all records and receipts, then see.

1. Transportation

Like that of a real estate agent, some professions require a good deal of driving. If this describes you, there is a standard federal mileage deduction of 58 cents per business mile.Or, if you would rather itemize costs, keep all receipts while keeping track of mileage, gas purchased, maintenance, registration fees, tolls, and parking. Then, divide your total mileage by your business mileage, and deduct the resulting percentage from your automotive costs.

2. Travel Expenses

If you’re heading out of town for any business-related reason, you can deduct your expenses. This means travel expenses for a plane, train, bus, rental car, Uber, Lyft, taxis, lodging, food, among other costs that are ‘ordinary and necessary.’ Again, keep all records and receipts.

3. Business meals

Business meals—in or out of town—are a 50% deduction. If you are throwing a party for your employees—it'is a 100% deduction. If you are entertaining a client and do not discuss business, it’s 0%.

4. Startup costs

If you started a business in 2021, you could deduct up to $5,000. The deductions must be related to creating your business, creating your business entity, and preparing it for launch. You can also deduct another $5,000 over the next three years if you start a retirement plan for your employees.

5. Business insurance

Chances are, your business has some form of insurance, and it is 100% deductible.

6. Rent

If you are renting a space for business use, you may deduct 100% of that cost, provided that you are not receiving equity or title to the property.

7. Depreciation

If your business owns and operates equipment that loses its value over time, you can deduct the depreciation. Let your tax lawyer or CPA help determine the annual rate of depreciation.

8. Advertising

You can write off 100% of any marketing and advertising expense, providing it is solely for gaining or retaining business. However, you can’t deduct any expenses related to lobbying for legislation.

9. Education

You can deduct those costs if you have funded training sessions for your employees or yourself, including travel. Once again, the training in question should be “ordinary and necessary” for your industry and business.

10. Office supplies

Supplies needed for running an office are fully deductible. These include ink cartridges, pens and paper, computer software, site hosting, cleaning supplies.However, three IRS rules must be followed when you deduct office supplies:

• You cannot keep a record of when the supplies were used
• You don’t make an inventory of the supplies at the beginning and end of the year
• Taking these deductions does not significantly skew your business income

11. Utilities

Expenses for heat/air conditioning, electricity, telephone, water, and sewage can all be deducted, as long as you can prove they are for business use.

12. Small Business Health Care Tax Credit

If you have less than 25 full-time employees and provide their health insurance, you can deduct 50% of their premiums, with smaller employers receiving more credit.

13. Salaries and benefits

If you have one or more employees, you can fully deduct their salaries, commissions, and bonuses.

14. Charitable donations

You can deduct all your charitable donations if they are made to a qualified organization and are in cash.

15. Business bad debt

If you have sold goods or services to a customer on credit and have been unable to collect payment, you can deduct this ‘worthless debt’.

16. Retirement

This is often forgotten when listing what items are tax-deductible for small businesses. If you have set up your own retirement plan, it's fully deductible if it is tax-qualified.

17. Home office

More and more people work out of their homes, which has changed what small business owners can deduct from their taxes. If you have a home workspace, divide the square footage of that workspace against the total square footage of your home and deduct that portion of your rent. Use that same percentage to deduct from your utilities, and if you have a separate business phone line, you can fully deduct that.

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Frequently asked questions

What can you write off on taxes for an LLC?

You can claim the same small business tax deductions as anyone/blog/small-business/6-costly-legal-mistakes-small-business-owners-make/ else.  Just make sure you are using the correct tax form for your business entity.

What is the 20% business tax deduction?

If you have income from a pass-through business, you can deduct up to 20% of your net business income from your income taxes. Consult with your tax lawyer or CPA to see if you qualify.

What can small businesses write off?

If you are wondering ‘what deductions can I claim for my small business, first make sure these expenses are ‘ordinary and necessary' for your business. Ineligible deductions are one of the more costly mistakes by small businesses. Be sure to consult with a tax lawyer before you file.