4 Common Small Business Expenses You Can Deduct

There are a number of small business expenses that you can deduct on your taxes. In order to get the maximum break on your taxes, you will want to take advantage of as many as possible. Here are a few common small business expenses that you can deduct. 

1. Payroll

When you have employees, you can deduct the amount of money that you pay them. Their salary and certain benefits can be deducted from your business taxes. 

2. Gifts

If you give gifts to clients as part of the business operations, you can also deduct part of the price of the gift. For each gift that you give, you can deduct up to $25. Therefore, it is not the total amount of the money that you spend on gifts, but the total number of gift recipients multiplied by $25 if the gifts are above that amount.

3. Retirement Contributions

When your small business offers a retirement plan, such as a 401k, you can deduct the entire amount from your income taxes. Therefore, to get the maximum tax break, you should try and put as much as you can into your employee's retirement accounts.

4. Supplies

Anything that you purchase for the purpose of running the business can be deducted. Things like copy paper, pens, folders and other commonly used items are deductible.

Can you deduct entertainment expenses for your small business?

Entertainment expenses are a legitimate tax deductible business expense as long as the entertainment is "ordinary and necessary." Two tests are used to determine if the expense is ordinary and necessary: one test asks if the expense was directly related to the course of conducting business, and the other asks if the expense was associated with the regular course of doing business. Under either test, the key will be to keep your receipt in case you are audited, as the IRS will need proof of the business expense. Schedule C-EZ or 1040 Form Schedule C is used for self-employed business people who need to deduct their entertainment expenses. 

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