Small Business? Keep These Tax Deductions in Mind

tax deductionsTax evasion is illegal, but tax avoidance is not. If you own a small business, there are a host of deductions that might work for you in reducing your tax bill.


According to the Office of Advocacy for the U.S. Small Business Administration (SBA), a small business is defined as “an independent business having fewer than 500 employees.” A small business can be defined by its number of employees, and oftentimes, by its revenue. The U.S. Census Bureau notes small businesses often earn revenue anywhere from $1 million to $40 million.


Overall, small businesses are a big driver of the economy. The SBA reported from the years 1995 to 2021, small businesses created 17.3 million net new jobs. At the same time, large businesses created 10.3 million. Offering their own challenges, rewards, and the opportunity to call the business shots, small businesses are attractive to entrepreneurs across the U.S.


If you currently own or are considering a start-up small business, it is important to keep tax deductions in mind. Deductions for which you legitimately qualify can lower your tax bracket and tax liability. Consider:

  • Startups: Expenses that you pay for investigating or creating a startup business may be eligible as a deduction. Some of the expenses you could deduct include training costs for workers (and their instructors), advertising, travel expenses for developing a customer base, or distribution network, and more.
  • Moving: If you move your business or your personal residence for business purposes, your moving expenses may be deductible.
  • Insurance deductions: Small business owners can usually deduct the costs of business insurance that are directly related to their business. The self-employed can also deduct personal and family health insurance costs.
  • Travel: True business-related travel expenses, like airfare, transit, or rideshare can qualify for business expense deductions. Just be prepared to prove it was legitimate travel associated with your business.
  • Tax credits: Unlike tax deductions, a tax credit can directly reduce your tax liability, dollar for dollar. If you are engaged in research to develop novel software approaches, products, or other offerings, check out the R&D tax credit. This is a credit which may align with the start-up costs we discussed above. If you hire within a distressed or rural business zone, take a look at the Empowerment Zone employment credit.


Awareness of deductions, credits, and laws that can assist your bottom line is important. Review IRS publications aimed at small business owners—and when in doubt about your taxes and compliance—speak with an experienced tax attorney for guidance.


Questions on business tax compliance or tax controversy?  Contact our legal group

If you receive an IRS audit letter or are challenged by a tax controversy in Cleveland, Chicago, or elsewhere nationally or abroad, the tax attorneys at Robert J. Fedor, Esq., LLC can help. Call us at 800-579-0997 or contact us online.


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