4 Tax Write-Offs Every New Business Owner Should Leverage in the First Year
Navigating the world of taxes can be daunting for a new business owner. I know firsthand the steep learning curve in not only business ownership but everything that comes along with it. After almost a decade of owning my own company, I now understand the enormous benefits of not only revenue-generating activities but also taxation-saving strategies.
If I didn’t leverage ANY tax deductions… I would owe the IRS an estimated $116,162 this year.
But instead, thanks to planning and smart strategies, I’m forecasting to pay approximately $24,000. That’s a savings of $92,000—and countless hours of hard-earned money staying in my pocket instead of going to Uncle Sam!
Tax planning doesn’t have to be overwhelming, but it does take a little intention.
With the right strategies in place, you can protect more of your income and spend it on the things that matter most to you—such as growing your business or finally taking that dream vacation. If you want to learn how to save more this tax season, I’m here to help! My collection of tax playbooks will walk you through these strategies that will allow you to keep more of your hard-earned money.
Let’s start by understanding 4 of the most important tax write-offs available to you during your first year as a business owner that will save you money. Alleviate the stress of all of the money you're investing into your business by asking the IRS for a portion of it back through these tactics. These tax strategies are there for you to leverage whether you know about them or not, so it's my goal to educate you on these 4 key write-offs and more!
start-up + organizational costs
Starting a new business comes at a cost. The IRS knows that and wants to incentivize patrons like you and me to take the leap and start a small business through tax write-off incentives. Thanks to these incentives, you can deduct up to $5,000 of start-up and organizational costs in your first year of business.
This includes expenses like market research, legal fees, and initial advertising efforts. If these costs exceed $5,000, the remaining amount can be deducted over a 180-month period. Start-up and organizational write-offs help reduce the financial strain of starting a new business, providing immediate savings in your first year of operation and beyond!
2. vehicle deductions
If you use a vehicle 50% or more for business purposes, you can leverage it as a tax deduction. There are two methods to choose from depending on your vehicle type and usage: the Mileage Method or the Actual Expense Method.
Mileage Method: With the mileage method, you are able to deduct a standard rate per mile (set annually by the IRS) driven for business purposes. In 2024 the mileage rate that can be applied is $0.67 per mile. Apps such as Miles IQ are a great investment to help you track miles driven.
Actual Expense Method: The second vehicle deduction option is what is called the Actual Expense Method. This is where vehicle-related expenses such as gas, maintenance, car washes, insurance, and car payments can be deducted as a business expenses for tax benefits.
Both methods have their advantages, so it's essential to work with a CPA to calculate which option provides the most significant tax benefit for you.
3. Marketing and Advertising Expenses
Marketing and advertising are crucial for attracting new clients and growing your business. This includes costs related to digital marketing, printed materials, website design, social media ads, and more. Keeping track of these expenses throughout the year can lead to substantial savings when you go to file your taxes.
4. Home Office Deduction
If you work from home and have a dedicated space used exclusively for business, you may qualify for a home office deduction. This deduction can be calculated in two ways:
Simplified Method: First you are going to want to determine how many square feet your home office is. From there, you will be deduct $5 per square foot for a maximum of 300 square feet, providing a capped deduction of $1,500.
Actual Expense Method: Calculate the percentage of your home used for business. For example, if your home office is 10% of your total home's square footage, and your qualifying home expenses are $25,000, your home office deduction would amount to $2,500.
Choosing the right method depends on your specific situation, so consider which approach offers the best deduction for your home office space.
Stay Organized + Maximize Your Deductions
Tax season is upon us; knowing these key write-offs is essential to reducing your taxable income. However, the organization is just as critical. It saves you time and stress and will also help cut down on billable CPA hours.
If you're overwhelmed or unsure where to start, consider joining my Tax Academy where you'll gain valuable insights and strategies to stay on top of your business finances and make tax season a breeze.
Don't miss the opportunity to keep more of your hard-earned income. Join the waitlist today and take control of your tax situation!
XO,
Jen
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