- Car and truck expenses: The cost of operating the vehicle for business is deductible. In deducting costs, the need to keep records of costs (e.g., gasoline, oil changes) is eliminated if you rely on the IRS standard mileage rate of 58 cents per mile instead of deducting your actual outlays.
- Salaries and wages: Payments to employees, including salaries, wages, bonuses, commissions, and taxable fringe benefits.
- Contract labor: The cost of freelancers or independent contractors is deductible. Be sure to issue Form 1099-MISC to any such contractor receiving $600 or more from you in the year.
- Supplies.
- Depreciation: This deduction is an allowance for the cost of buying property for your business. It includes the Section 179 deduction for equipment purchases up to a dollar limit ($1,020,000 in 2019).
Rent on business property.The cost of renting space an office, boutique, storefront, factory, or other types of facility. - Utilities: Electricity/Phone/Cable, etc.
- Taxes: You can deduct licenses, regulatory fees,employer taxes, including the employer share of FICA, FUTA, and state unemployment taxes.
- Insurance: Business owners policy, malpractice coverage, flood insurance, cyber liability coverage, and business continuation insurance.A small business may qualify to claim a tax credit for up to 50% of the health care premiums paid for employees (a better tax break than a deduction). Also, the cost of health coverage for self-employed individuals and more-than-2% S corporation shareholders is not a business deduction. Instead, the premiums are deducted on the owners personal tax return.
- Repairs and Maintenance.
- Commissions and fees.
- Note: Commissions paid in connection with buying realty are not deductible; they are added to the basis of the property and usually are recovered through depreciation.
- Travel: This includes the cost of transportation and lodging while out of town on business.
- Advertising.
- Home office: A portion of personal expenses of a home is deductible as a business expense if the home is used regularly and exclusively as the principal place of business, a place to meet or deal with clients or customers, or as a separate structure used in the business. The deduction includes both direct costs (e.g., painting a home office) and indirect costs (e.g., the percentage of rent or mortgage interest and real estate taxes that reflect the percentage of business use of the residence).
- Legal and professional fees.
- Meals: 50% of meals incurred in the course of business.
- Rent on machinery and equipment.
- Interest on business indebtedness.
- Employee benefit programs and qualified retirement plans: The cost of employee benefit programs, such as education assistance and dependent care assistance, as well as contributions to employees qualified retirement plan accounts, is deductible. For self-employed individuals, contributions to their own qualified retirement plan accounts are personal deductions claimed on Form 1040.
- Mortgage interest: Businesses that own reality can fully deduct mortgage interest.
