The U.S. tax code can be dense and confusing, especially for businesses. There are many rules about which expenses you can write off and which don’t qualify. On top of that, only some expenses are fully deductible, while others are partially deductible.
Although we cannot advise on your taxes, Viking Mergers & Acquisitions can connect you with a qualified tax professional. Meanwhile, we’ve gathered this list of common tax deductions for business owners to ensure you don’t miss any opportunity to write off expenses – that way, you can save money and re-invest it in growing your business.
Looking for more ways to save on your business taxes? Be sure to check out our list of tax credits for business owners, too.
There’s still time to take advantage of these 23 business tax deductions for the 2022 tax year:
You pay to keep the lights on in your place of business, whether a shop, factory, restaurant, office, or other location. You can deduct all utility expenses for all of your business locations. These expenses include:
- Water and sewer
As a business owner, you may have a number of insurance policies to protect your business and your employees. You get a tax deduction for paying the premiums on many types of business-related insurance, including:
- Property insurance
- Professional liability insurance
- Malpractice insurance
- Workers’ compensation insurance
- Auto insurance for business vehicles
- Business interruption insurance
- Group health insurance coverage for employees
You may also qualify for a business tax credit for employee health insurance purchased through the Small Business Health Options Program, the health insurance marketplace for employer-sponsored healthcare plans backed by the Affordable Care Act.
Self-Employed Retirement Plans
There is a tax deduction for contributions to a traditional IRA or SEP IRA. These are best suited for self-employed people or business owners with up to a few employees. (A Simple IRA is better for larger businesses with up to 100 employees.) For tax year 2022, contributions made to employee accounts are deductible as a business expense. (The legislation signed into law in December 2022 allows for Roth contributions, effective in 2023.) Contribution limits apply, so be sure to consult your tax professional.
Business Property Costs
Another tax deduction for business owners is the cost to rent or lease your storefront, shop, restaurant, office, manufacturing or fabrication plant, or other place of business. If you rent a storage facility for business purposes, you can deduct those payments, too.
Many business owners choose to lease equipment for their business. Even though you don’t own the equipment, you can still write off the rental costs. If you purchase equipment for your business — whether it’s new or used — you can write off the depreciation over multiple years.
Starting with the 2022 tax year, you can deduct up to $1,080,000 for depreciation under the Section 179 deduction. This deduction covers many types of business equipment, including
- Computers, printers, and other technology
- Manufacturing and fabrication equipment
- Warehouse equipment
- Construction equipment
- Medical and dental equipment
- Business vehicles, except for SUVs, which now have a maximum deduction of $27,000
Business Vehicle Maintenance and Use
Generally, you can deduct any necessary expense related to your business vehicle, including:
- Oil changes
- Maintenance and repairs
- Auto insurance
- Registration, plates, and tags
- Lease payments
There are two ways to calculate your business vehicle tax deduction:
- Standard Mileage: This method involves multiplying the miles for business use by the IRS mileage rate. For the first half of 2022, the mileage rate is 0.585 per mile (from 1/1/22 to 6/30/22). For the second half of 2022, the mileage rate is 0.625 per mile (from 7/1/22 to 12/31/22).
- Actual Expenses: This method involves itemizing all qualifying vehicle expenses for the tax year.
No matter which method you choose, you must keep good records. That means keeping all gas, oil change, car wash, and other receipts or regularly documenting mileage for every business trip.
Office Supplies and Furniture
In the given tax year, you can write off all expenses related to supplying your office, store, plant, or other workspaces. Some of the most common deductions in this category include:
- Printers, ink, and paper
- Computers and necessary accessories
- Writing utensils
- Staplers and staples
- Desks and chairs
- Cleaning products
- Operation-related supplies, like medical or dental supplies for a practice
Many business owners rely on software to manage different aspects of the business. These vital tools are tax-deductible, whether you make a one-time purchase for a software license or pay for subscription access.
Some of the most common third-party software that you can deduct on your tax return include:
- Graphic design programs
- Office management software
- Accounting or billing software
- Marketing platforms
- Writing and editing tools
- Human resources programs
Advertising and Promotions
You can claim any expenses for marketing your business, including:
- Making and putting up billboards
- Designing and printing business cards
- Creating and launching digital and print ads
- Sending thank you cards as a way to maintain client relationships
- Launching a website
- Sponsoring an event
Business Meals and Entertainment
For many business owners, taking a client or business connection out to lunch is vital to building new professional relationships and keeping old ones. Typically, business meals are 50% deductible. For the 2022 tax year, however, you can deduct 100% of qualifying business meals taken between January 1, 2022, and December 31, 2022. This bonus deduction was part of the government’s COVID relief efforts for businesses. (Note, though, starting in tax year 2023, you can only deduct 50% of qualifying business meals.)
In addition to business meals for clients and business connections, expenses for certain business entertainment, like employee picnics and recreational activities, may also qualify for deductions. However, any costs for employee meals in the office are 100% deductible.
You must keep good records for all business meals and qualifying entertainment, including receipts for all expenses you paid, the date and location of the meal or event, the attendees and their relationship to the business.
Business Travel Expenses
Depending on your industry, you or your employees may need to travel out of town for business. Whether the trip is to the next town over or an ocean away, you can write off qualifying travel expenses for all business trips as long as they meet these three qualifiers:
- The trip is necessary and directly related to the business
- The traveler is gone from your tax home, the city where your business is based
- The traveler is gone for more than a full workday and must stop to rest before returning home
Some examples of qualifying business trips include attending a business meeting in a different location or going to a professional conference or tradeshow.
You can write off business travel expenses like:
- Ground transport, like a rental car, taxi, train, or bus
- Toll and parking fees
- Per diem meals
- Incidentals, like tips or laundry service
If you have taken on business debt, like a loan or credit card, you must pay interest in addition to the principal amount. You can deduct all your interest payments on formal, traditional business loans and credit cards.
“Bad debt” is any money you loan out for business purposes but never get back. Some examples include extending credit to customers or clients or loaning money to employees, clients, suppliers, distributors, or other vendors. You can claim bad debt on your Schedule C, Form 1040.
All banking fees you incur in a tax year can be written off. Deductible bank fees include:
- Annual fees for business credit cards
- Processing fees for banking transfers for your business account
- Overdraft fees on your business bank account
- Transaction fees for using a third-party payment processor, like PayPal
All business taxes, including local, state, and federal taxes, real estate taxes, sales taxes, FICA taxes, FUTA taxes, and unemployment taxes, are 100% deductible.
The administrative costs for business licenses are 100% deductible, including operational licenses and licenses to practice or sell certain products, like alcohol.
If you move your business, you can deduct the costs of moving equipment, supplies, and inventory from one location to another. In addition, you can deduct labor and transportation costs, temporary storage costs, and moving insurance.
Employee Wages and Benefits
All employee salaries, bonuses, commissions, and vacation pay are fully deductible. However, salaries for business owners, partners, or LLC members are not deductible as they’re not considered employees.
Specific employee benefits programs such as education assistance, dependent care assistance, retirement benefits, and life insurance benefits are also deductible.
If your business donates money, supplies, property, or food or makes another contribution to a qualifying charitable organization, it can deduct a portion of those contributions on its taxes. The IRS states that a business can “deduct qualified contributions of up to 25 percent of its taxable income.” Your business should claim any contributions over that amount on next year’s tax return.
Qualifying organizations include:
- Public charities
- Nonprofit community organizations
- Nonprofit or not-for-profit educational or healthcare institutions
- Religious organizations
- Research institutions
Employee and Customer Gifts
Giving gifts is a great way to maintain relationships with your clients, customers, employees, and other business connections. You can deduct up to $25 per gift given if you gave it in direct relation to the business, such as maintaining a business relationship or awarding an employee for great work.
Education can be critical to growing your business. You might pay for education for yourself as a business owner or invest in your employees’ education to make them more effective in their roles. As long as the education is directly related to your business or that person’s professional role in your business, you can write off education expenses. Qualifying education expenses can include:
- Workshops or courses (in-person and online)
- Attending professional conferences and training seminars
- Travel to and from class
- Purchasing books related to your industry or field of work
- Subscribing to industry publications
Professional Service Fees
Any time you hire an outside consultant or service provider to help with an aspect of your business, you can deduct that expense. For example, you can write off the cost of hiring legal services, accounting services, or business consulting.
Contracted Labor Costs
You can also deduct 100% of the costs to hire freelancers or independent contractors. Just be sure to issue a 1099 to any contracted laborer to whom you paid more than $600 in the tax year.
Knowing which expenses are deductible, how much you can deduct, and how to deduct them on your tax return can save your business a lot of money this and every tax season. If you haven’t filed your 2022 business taxes yet, you still have time to review your expenses and make sure you’ve taken all deductions that you can. Viking Mergers & Acquisitions cannot give you tax advice, but we can connect you with a qualified tax professional who can help you put these deductions to good use.
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1. 2022 Instructions for Form 4562 (Accessed January 2023)
2. IRS increases mileage rate for remainder of 2022 | Internal Revenue Service (Accessed January 2023)
3. Publication 463 (2021), Travel, Gift, and Car Expenses | Internal Revenue Service (Accessed January 2023)
4. Topic No. 453 Bad Debt Deduction | Internal Revenue Service (Accessed January 2023)
5. Charitable Contribution Deductions | Internal Revenue Service (Accessed January 2023)
6. Publication 463 (2021), Travel, Gift, and Car Expenses | Internal Revenue Service (Accessed January 2023)