Corporate Taxes: Business Tax Deductions to Take (and Avoid!)

When preparing for corporate taxes, everyone knows your business is eligible for business tax deductions. These deductions are available for expenses, such as supplies and wages, you incurred this year while running the business. These expenses will be deducted from your tax liability and reduce your overall tax bill.

What many people aren’t as clear on is what you can and cannot claim as a deduction in your corporate tax filings. Improper deductions are a big reason businesses get audited and potentially fined. It’s crucial to properly deduct expenses as a business owner.

Keep in mind these little-known business deductions and those you should avoid as you prepare for your corporate tax filings:

Business Tax Deductions to Take

• Depreciation - You’re allowed to deduct the cost of depreciation of the property and equipment for your business this year. 
• Home Office - If your business is based in your home, you are able to deduct a small portion of your home in a tax deduction. 
• Travel and Mileage - If you travel or drive for your business, you are allowed to deduct transportation costs, hotels, and gas in your business filings. 

Business Tax Deductions to Avoid

• Startup Costs - You cannot deduct startup costs until you have your first sale; don’t make the mistake of taking a deduction on your startup costs before you’re able. 
• Commingling - You cannot take personal expenses as business expenses in your deductions or vice versa. Avoid commingling! 
• Undocumented - If you do not have paperwork or a receipt for the expense you plan to deduct, reconsider. This is a big audit flag and can come back to haunt you. 

This list is not exhaustive; there are many more business expenses you can and cannot take deductions for. Taking huge deductions can trigger an audit if the deduction amount is proportionally much higher than your income; but too small of a deduction can leave your business paying more taxes than necessary. It’s important for you to understand and take advantage of all deductions available to your business without treading into dangerous territory.

If your business tax preparation has you feeling overwhelmed or confused, please contact Tally Services. We will help you sort through your business expenses and determine which can be deducted from your tax liability. We’ll meet you exactly where you are and help you navigate the challenges and stress of corporate tax returns.