5 Unexpected Tax Deductions Every Small Business Owner Should Know – Latest News Update

Tax time can be exhausting for any individual taxpayer. For small business owners looking to cut costs every step of the way, the task can be downright overwhelming.

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According to the IRS, business expenses must be both “ordinary and necessary” to be deductible, but those definitions vary depending on a person’s understanding of tax rules and the strength of their moral compass when it comes to filing taxes.

Aside from figuring out how much of your larger business expenses — inventory, salaries, rent, equipment, utilities — can be deducted, there are some common but surprising items that can reduce the amount of income subject to federal and state taxes.

The agency provides a comprehensive amount of qualifying information on small business tax deductions that can help you lower your taxable income. Here are five unexpected tax deductions every small business owner should keep in mind before filing.

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1. Gym Memberships

In general, sports memberships are not tax deductible. However, there are instances where you can claim a gym membership on your tax return. Sure, if your small business is fitness-related or you need to be in good shape (e.g., Personal Trainers), this may qualify you to deduct the cost of a gym membership or equipment from your taxes, per Keeper Tax Inc.

You may also be able to list your gym membership as a medical expense, but this is considered a personally itemized expense. If you have a medical diagnosis for obesity or hypertension, for example, and you are prescribed to host weight-loss activities or support groups through a gym, classes or a membership may be considered tax-legal.

2. Home Renovations

If your home is your principal place of business or if you use a regular, exclusive space in your home for conducting business, home improvements qualify for tax deductions. While you can’t claim a deduction for a workspace or home office if you also work in an employer’s office, home office remodels or improvements are deductible if they are used only in the areas of your home that are used for business.

Improvements that benefit your home in general (for example, having the heating system repaired) are also partially deductible. Keep in mind that the IRS follows strict guidelines regarding what constitutes a home office, so be sure to adhere to that. A laptop on your kitchen table isn’t considered an office, so don’t expect your new showroom kitchen and entertaining area to get a green flag when you try to include it on your small business tax return.

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3. North American Travel

Business travel is very common. If you need to travel for a business reason, such as meeting a client or attending a conference, you can deduct 100% of your expenses.

But what if that conference is on board a cruise ship in the Bahamas or your client lives in Costa Rica?

As Business News Daily noted, most travel outside of North America is not deductible unless rationalized as “ordinary and necessary.” However, no reasons are required for the plane, train or bus tickets, lodging and parking, tolls and fees associated with business conducted within North America. Of course, as with deduction, documentation and rationale may be required for anything considered extraordinary. The IRS considers your business trip a vacation if it turns out no business took place.

4. Pets at work

If you have a service or assistance animal or guide dog, you can of course deduct the costs of purchase, training and maintenance as medical expenses. But you may be able to get a tax deduction if you have working animals that are also necessary for the operation of your business.

However, as Business News Daily reported, you must be careful to prove and document what purpose or service your pet provides to the company. For example, if you’re Pete from “Pete’s Performing Parrots,” you shouldn’t have a problem claiming certain deductions from your taxes. However, for less obvious examples, any commercial, advertising, and business expenses you claim must be related to your pet at work.

“However, this only applies to certain animals in certain situations,” said Joshua Zimmelman, president of Westwood Tax & Consulting. “For example, you can say a Rottweiler is a watchdog, but don’t try that with a hamster or you’ll probably raise a red flag with the IRS.”

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5. Landscape improvements

Unlike office space in your home, deducting the cost of maintaining the exterior of your home through improvements is more difficult to substantiate. However, if you regularly meet with clients at your home, you can deduct some of your landscaping costs if you prove they are directly related to your business.

As Forbes noted, in the case of Langer v. Commissioner, repairs to the driveway and maintenance of the lawn were found partially deductible by the tax court after the petitioners claimed substantial costs related to the business performed at the residence, related with the depreciation of the house, lighting, driveway and landscaping.

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