tiny Business levy Deductions: 22 Money Saving Tips

As a tiny business owner, the easiest way to reduce your levy statement is to make sure you’re claiming all the business costs you qualify for. In many cases, you may not recognize which deductions are available for your business, and how to apply them.

Read on to discover about the levy write-offs and tiny business levy deductions you may be missing and some ideas on how to use them as a means to reinvest in your business.

What levy deductions can tiny business owners write off?

If you run an online store, putting some of your profits toward levy-deductible business costs can assist your business develop and provide you a shatter arrive levy period.

Even day-to-day costs—car trips to the post office or the electricity statement for your home office—could be saving you money, so long as they’re reported in your tiny business budgetary reporting records.

Top 22 tiny business levy deductions

1. Packaging and shipping
2. Home office and workspaces
3. Utilities
4. Improvements and repairs
5. Coworking space
6. Business earnings and financial institution fees
7. Business insurance
8. Health insurance
9. superannuation plans
10. Professional services including bookkeeper, accountant, and levy consultant fees
11. Legal fees
12. impoverished debts
13. Independent contractors
14. Employees
15. Advertising
16. Marketing tools and services
17. Website fees, like Shopify
18. Domain and web hosting
19. Online services
20. Classes and education
21. Magazines
22. Business trip and vehicle costs

1. Packaging and shipping 

Unless you’re running a dropshipping business, it’s your job to deliver the goods. Luckily, the IRS considers the expense of doing so “ordinary and essential.”

Postage, shipping meter subscriptions, delivery charges—they’re all deductible arrive levy period. Still, you’re better off paying less for shipping in the first place.

The expense of all ecommerce packaging and of getting your product delivered on period and in one piece can be deducted on your levy yield. This includes envelopes, boxes, document, packing material, tape, labels, markers, and printer ink.

Shipping… is not just expense of goods sold. You require packing material, and there are postage costs as well. When I look at my borrowing card statement at the complete of the month, it’s a huge outlay.

2. Home office and workspaces

If you run your store from home, you qualify for a deduction. The size of this deduction will depend on how much of your home is devoted to doing business.

These are the requirements you require to meet:

• Your work area is used only for business activities. (If you occasionally do paperwork at the kitchen table, your kitchen does not qualify as a home office.)
• Your work area must be the loan amount place of business for your ecommerce corporation. You should be ready to prove this with a consistent, printed schedule.
• The majority of the period you spend in your home work area must be devoted to doing business. 

Also, you should have no alternative workspace. That means no external office or coworking space from which you run your business.

You have two options for calculating the home office deduction: the simplified way and the regular way. Unsurprisingly, one is easier than the other.

Using the simplified way, you deduct $5 per square foot of your home used as business property, up to a maximum of 300 square feet.

To use the regular way, you compute the percentage of your home’s square footage that you use for business, then apply that percentage to your home costs—rent or mortgage earnings, property taxes, electricity, heat, water, and anything else that makes it feasible to occupy your home.

For example, if you use 10% of your home’s square footage for business, you can deduct 10% of your mortgage earnings on your levy yield.

To use the regular way, update costs on Form 8829. To use the simplified way, fill out the appropriate worksheet on Schedule C of Form 1040.

One of these methods may provide you a better deduction than the other. It really depends on the nature of your business and your home office.

Heads up

The IRS has a reputation for carefully scrutinizing home office costs. Make sure you have the info you require to back up your claim. receive pictures of your work area and maintain a copy of your schedule for working there. Each budgetary year, keep them filed with your levy records and receipts.

3. Utilities

If your home qualifies as a workplace, household utilities—heat, water, and electricity—can be deducted on your levy yield.

4. Improvements and repairs

A essential repair to your home office—for instance, fixing a broken window—can be reported as an outlay on your levy yield.

An advancement to your home office can also be reported, but it must be depreciated over a period up to 27.5 years. Work done on your home office is classified as an advancement if it involves betterment, adaptation, or restoration—for instance, installing a larger window.

Before paying for an advancement or repair, talk to your accountant to make sure you’re classifying it correctly.

5. Coworking space

If you rent coworking space where you contribute to the expense of utilities and office supplies, there’s a excellent chance those costs may be a levy deduction. Check with your CPA.

6. Business earnings and financial institution fees

If you have a business borrowing card or a tiny business borrowing, anything you pay in earnings during the course of the budgetary year is levy deductible. The same applies to fees charged by your financial institution for maintaining or using your business checking account.

7. Business insurance

If you’re operating an ecommerce business—whether you’re an S corporation, self-employed, or an LLC—business insurance is levy deductible. 

Some types of business insurance you can get a levy shatter on are:

• Data breach insurance
• Commercial property insurance
• Professional obligation insurance
• General obligation insurance
• Workers’ compensation insurance

If you hold any of these insurance policies to assist protect your business, you may be able to write the premiums off. If the insurance policies are ordinary and essential, you can write off the packed amount.

8. Health insurance

If you’re self-employed, you may be eligible for a health insurance additional expense deduction.

In 2010, the tiny Business Jobs Act created a recent deduction. This applies to health insurance premiums paid by self-employed individuals. If you’re self-employed, you can deduct 100% of health insurance costs as an adjustment to your taxable profits for these people:

• Yourself
• Your spouse
• Your dependents
• Your children under age 27 at the complete of the levy year

You can claim the health insurance deduction as an above-the-line deduction on Form 1040, Line 29. Talk to your levy professional for more information. 

Note, you can’t claim a levy borrowing for any month that you had a health insurance schedule through you or your spouse’s employer.

9. superannuation plans

If you’re self-employed, you can deduct contributions to your superannuation plans as an adjustment to taxable profits. Plans include:

Simplified Employee superannuation (SEP) IRA

A superannuation funds schedule established by employers—including self-employed people—to provide superannuation benefits.

funds Incentive Match schedule for Employees (straightforward) 

A superannuation funds schedule for tiny businesses with less than 100 employees. straightforward IRAs work like traditional IRAs and are easier to set up than a 401(k) but the employee superannuation schedule contributions limits are lower, compared with 401(k)s.

Qualified schedule: defined-contribution or defined-advantage

A defined advantage schedule, also known as a superannuation, is a superannuation account where the employer contributes all the money and promises you a set payout when you retire. A defined contribution schedule, similar to a 401(k), requires you to put in your own money.

10. Professional services including bookkeeper, accountant, and levy consultant fees

fascinating truth: You can actually deduct the expense of conference with a levy consultant who advises you on which costs you can deduct.

It’s known as a professional services deduction, and this deductible outlay actually applies to a range of professionals who assist with all things tiny business finance. When you hire a business lawyer, CPA, bookkeeper, online bookkeeping service, or levy consultant, their fees qualify as deductible business costs.

11. Legal fees

If you hire or retain an attorney to prepare contracts, file trademarks and copyrights, discuss leases, defend your business in court, or perform other services for your business, you can write off their fees.

12. impoverished debts

Sometimes customers or clients simply won’t pay for the product or service you already provided. It doesn’t matter how many statement reminders you send, you may never get that money. These are known as impoverished debts. 

impoverished debts, or uncollectible accounts, are money owed to you by a customer or client that you are unable to collect. You can write off impoverished debts at the complete of the first year if it turns out the obligation is uncollectible.

impoverished debts can include:

• Loans to suppliers and clients
• Business borrowing guarantees
• borrowing sales to customers

For more information on the impoverished obligation reduction and levy law, refer to this IRS publication. 

13. Independent contractors

If you hire independent contractors or freelancers for any purpose related to your business—for instance, taking photos of products for your online store—the expense of their services is a levy deduction.

Always be sure to collect 1099 forms from independent contractors before they commence working for you, and file them properly (you’ll require to submit one copy to the contractor and another to the IRS before deadline).

Heads up

The IRS is often on the lookout for employers who try to avoid paying employment taxes by classifying employees as contractors.

Because ecommerce businesses are representing themselves online, the visuals tend to be so significant. You desire to invest in the correct people to assist you make and realize those.

14. Employees

If deemed reasonable and essential, your business can receive a levy cut on providing employee benefits, compensation, and perks, including:

• Employee pay
• Vacation pay and ill period
• HSA employer contributions
• Employee assistance programs
• Life insurance coverages
• Education
• Meals and lodging 

How you claim these business costs depends on your business structure.

• Sole proprietorships and single-member LLCs use the costs section of Schedule C.
• Partnerships and multi-member LLCs use the Deductions section of Form 1065.
• Corporations use the Deductions section of Form 1120 or Form 1120S (for S corporations).

15. Advertising

assist your business develop and pay fewer taxes while you’re at it. Whether you advertise your business on Instagram or in your local newspaper, the expense of advertising is a levy deduction.

This includes both the worth of placing the ad and any fees you pay to have it written and designed. If you hire a designer, copywriter, or other marketing professional to produce ads for you, you deduct their wages as you would any 1099 worker.

16. Marketing tools and services

If you use tools like Klaviyo or AdEspresso to manage your email and Facebook campaigns, they count as ordinary and essential marketing costs. The expense of your subscriptions can be deducted.

Our best deductible outlay goes into paid marketing—toward navigator creation and filling the top of our funnel.

17. Website fees, like Shopify

Shopify gives you all the tools you require to run an online store. As such, for any ecommerce business, Shopify fees definitely qualify as an ordinary and essential business outlay.

18. Domain and web hosting

You can’t run an ecommerce business without an online presence. Domain and ecommerce hosting are levy deductible. If you purchase web design templates or ownership images to use on your site, you can also deduct their expense. The same applies if you pay to upgrade your store’s theme in Shopify.

19. Online services

Beyond operating an online store, the services you use to engage with current or potential customers can be deducted.

So, if you publish a newsletter, you can deduct the expense of your email marketing answer. If you schedule social media posts, you can deduct the expense of Hootsuite. Or, if you’re optimizing your site for search engines, you can deduct the expense of SEO tools, such as SEMRush.

20. Classes and education

If you receive classes to upgrade your skills in a way that is relevant to your business, you can deduct their expense.

The class qualifies for a deduction if you receive it in order to obtain a certification—such as becoming a Certified E-commerce Consultant.

But even less specific forms of education—for instance, a photography class that helps you receive better pictures of the products you sell—can be deducted. So long as the class directly improves your day-to-day business operations, it’s levy deductible. 

Also, the expense of transportation to any business-related classes qualifies as a trip outlay.

I use the education outlay quite a bit. One thing that’s significant to me is the Japanese concept of kaizen, of continuous education—and of having an experimental mindset.

21. Magazines

Subscriptions to trade magazines related to your industry are levy deductible too. Make sure they’re specifically connected to your industry, though. General earnings business magazines do not qualify.

22. Business trip and vehicle costs

As an commence-up founder, you’re probably mobile.

If you use your vehicle to transport packages (to the post office, for instance), meet with clients, or carry out any other business operations, you have a range of business costs you can choose to claim.

When your vehicle is used exclusively for business purposes, you can deduct the packed outlay of its operation. But if you use it for both business and personal purposes, you’ll require to compute the percentage of the expense of operation that applies to business. 

You have two options for claiming a business mileage deduction:

• The standard mileage rate deduction, as of 2023, is 65.5¢ per mile. Track this throughout the year with an app like MileIQ, and check the relevant IRS page every budgetary year in case the rate has changed.
• The entire expense of what you paid in vehicle costs over the course of the year—including fuel, maintenance, and repairs.

Other trip costs you incur in the course of doing business—parking fees, cab fares, or conference tickets, for example—can be claimed.

What about other business costs?

Depending on the nature of your business, there may be other costs you can claim on your levy yield.

The IRS deems a business outlay to be levy deductible if it is ordinary and essential.Meaning, it is an outlay you would incur ordinarily in the course of conducting business, and it is essential for your business to operate.

When in question, recall this guideline, and hang onto the receipts attached to any business related spending. That way you can (and should) double check with your CPA to confirm what is, and what isn’t, levy deductible before you file your yield.

You may be tempted to get creative with levy deductions. Instead, focus on strategic levy planning for better money flow management. The globe of business costs is packed of grey areas, and it can be straightforward to overstep the boundaries set by the IRS. As always, talk to your CPA or levy adviser before claiming any costs on your yield.