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Tax season can be stressful for small business owners, but it doesn’t have to be. Did you know there are dozens of tax deductions available that could save you thousands of dollars?
At SDCM Tax Service, we’ve seen too many Cincinnati and Ohio business owners leave money on the table simply because they didn’t know about these hidden opportunities. Whether you’re a seasoned entrepreneur or just starting out, understanding these deductions can make a huge difference for your bottom line.
In this article, we’ll dive deep into 10 often-overlooked tax deductions, explain how they work, and provide tips to ensure you’re maximizing your savings. Plus, we’ll share why partnering with a tax professional like SDCM Tax Service can help you stay compliant while keeping more money in your pocket.
1. Home Office Deduction
If you run your business from home, you may qualify for the home office deduction. This allows you to deduct a portion of your rent, utilities, and even internet costs based on the square footage of your workspace. Many Ohio business owners skip this one because they think it’s too complicated, but it’s worth it!
How It Works:
Calculate the percentage of your home used exclusively for business. For example, if your home office is 10% of your home’s total square footage, you can deduct 10% of your rent or mortgage interest, utilities, and other related expenses.
Alternatively, you can use the simplified method, which allows a deduction of 5persquarefootofhomeofficespace,upto300squarefeet(maximum5persquarefootofhomeofficespace,upto300squarefeet(maximum1,500).
Pro Tip: Keep detailed records and take photos of your workspace to substantiate your claim in case of an audit.
2. Business Use of Your Car
Do you use your car for business purposes? Whether it’s meeting clients, running errands, or making deliveries, you can deduct mileage or actual expenses like gas, repairs, and insurance. Keep a detailed log to maximize this deduction.
How It Works:
Track your mileage using a logbook or an app like MileIQ. The IRS allows a standard mileage rate (65.5 cents per mile in 2023) or actual expenses (gas, maintenance, insurance, etc.).
Only business-related trips count—commuting to and from your primary workplace doesn’t qualify.
Pro Tip: If you use your car for both personal and business purposes, only the business portion is deductible. Be meticulous in tracking your mileage to avoid red flags.
3. Startup Costs
Did you know the IRS allows you to deduct up to $5,000 in startup costs for your business? This includes expenses like market research, legal fees, and even travel costs related to launching your business. If you’re a new Cincinnati entrepreneur, don’t miss this one!
How It Works:
Startup costs include expenses incurred before your business officially opens, such as advertising, employee training, and permits.
You can deduct up to $5,000 in the first year, with the remaining costs amortized over 15 years.
Pro Tip: Keep receipts for all startup-related expenses and consult with a tax professional to ensure you’re categorizing them correctly.
4. Meals and Entertainment
While the rules have changed in recent years, you can still deduct 50% of business-related meals. Taking a client out for coffee or lunch? That’s deductible! Just make sure to keep receipts and note the business purpose.
How It Works:
Meals must be directly related to your business, such as discussing a project or meeting with a potential client.
Entertainment expenses (like tickets to a game) are no longer deductible, but meals during entertainment events may still qualify.
Pro Tip: Use apps like Expensify to track meal expenses and jot down the business purpose on the receipt.
5. Professional Services
Hiring a tax professional, accountant, or attorney for your business? Those fees are deductible! At SDCM Tax Service, we help Cincinnati business owners maximize their deductions while staying compliant with Ohio tax laws.
How It Works:
Fees paid to professionals for services like tax preparation, bookkeeping, and legal advice are fully deductible.
This also includes fees for industry-specific consultants or coaches.
Pro Tip: If you’re working with SDCM Tax Service, your fees are not only deductible but also an investment in saving money and avoiding costly mistakes.
6. Software and Subscriptions
From accounting software to industry-specific tools, the cost of software and subscriptions used for your business is fully deductible. Even your Netflix subscription could be deductible if you use it for research or content creation!
How It Works:
Deduct the cost of software like QuickBooks, Adobe Creative Cloud, or project management tools.
Subscriptions to industry journals, online courses, or even streaming services (if used for business purposes) also qualify.
Pro Tip: Keep a list of all software and subscriptions you use for your business and their associated costs.
7. Health Insurance Premiums
If you’re self-employed and pay for your own health insurance, you can deduct 100% of your premiums. This is a huge benefit for Ohio small business owners who often overlook this deduction.
How It Works:
Premiums for medical, dental, and long-term care insurance are deductible.
This deduction is taken on your personal tax return, not your business return.
Pro Tip: If you’re also covering your family, their premiums are deductible too!
8. Retirement Contributions
Contributing to a retirement plan like a SEP IRA or Solo 401(k) not only helps you save for the future but also reduces your taxable income. It’s a win-win for Cincinnati entrepreneurs!
How It Works:
Contributions to retirement plans are tax-deductible, and the limits are often higher for self-employed individuals.
For example, in 2023, you can contribute up to 66,000toaSEPIRAor66,000toaSEPIRAor22,500 to a Solo 401(k) (plus a $7,500 catch-up if you’re over 50).
Pro Tip: Work with a financial advisor or tax professional to choose the best retirement plan for your business.
9. Education and Training
Investing in your skills? Courses, workshops, and even books related to your business are deductible. Whether you’re learning new marketing strategies or brushing up on industry trends, the IRS rewards your efforts.
How It Works:
Deduct the cost of tuition, books, and travel expenses for education that maintains or improves your skills.
This includes online courses, conferences, and certifications.
Pro Tip: Keep detailed records of your education expenses and how they relate to your business.
10. Bad Debts
If you’ve provided goods or services but haven’t been paid, you may be able to write off those unpaid invoices as bad debts. This is especially helpful for small businesses dealing with cash flow challenges.
How It Works:
To claim a bad debt deduction, you must prove that the debt is uncollectible.
This typically applies to businesses that use the accrual accounting method.
Pro Tip: Document your efforts to collect the debt, such as emails or letters, to support your claim.
Bonus Tip: Don’t Go It Alone!
Navigating tax deductions can be overwhelming, but you don’t have to do it alone. At SDCM Tax Service, we specialize in helping Cincinnati and Ohio business owners uncover every possible deduction while staying compliant with tax laws. Let us handle the numbers so you can focus on growing your business.
Why These Deductions Matter
Small business owners often operate on tight budgets, and every dollar saved can be reinvested into growing your business. By taking advantage of these deductions, you can:
Reduce your taxable income
Lower your tax bill
Improve cash flow
Invest more in your business
Ready to Save Big?
Don’t let another tax season pass you by without taking advantage of these deductions. Contact SDCM Tax Service today for a free consultation and let us help you keep more of your hard-earned money. Share this article with fellow business owners—they’ll thank you later!