Maximizing Savings: Common Tax Deductions and Credits for U.S. Small Businesses

What are the most common tax deductions and credits available to small businesses in the US?

Small businesses in the US can take advantage of several tax deductions and credits to reduce their tax liabilities. Here are some of the most common ones:

1. Section 179 Deduction: Small businesses can deduct the full cost of qualified property in the year it is placed in service, up to a certain limit. This includes equipment, machinery, and certain software.

2. Business Expenses: Businesses can deduct ordinary and necessary expenses such as rent, utilities, office supplies, and employee salaries.

3. Qualified Business Income Deduction: A deduction of up to 20% of qualified business income is available for certain pass-through businesses, such as S corporations, partnerships, and sole proprietorships.

4. Employee Benefits: Employers can deduct the cost of employee benefits, such as health insurance premiums, retirement plan contributions, and paid time off.

5. Home Office Deduction: If a business owner works from a home office, they can deduct a portion of their home expenses, such as rent or mortgage interest, property taxes, and utilities.

6. Research and Development Tax Credit: Companies that invest in research and development may be eligible for a tax credit of up to 20% of their qualified research expenses.

7. Work Opportunity Tax Credit: A credit available to businesses that hire individuals from certain targeted groups, such as military veterans, long-term unemployed individuals, and ex-offenders.

Overall, small businesses are eligible for numerous tax deductions and credits, making it important to consult with a tax professional or CPA to determine which deductions and credits are applicable and correctly filing them to minimize tax liabilities.