Tax deductions are business expenses you can subtract from your income before you pay taxes.
When you run a business, you have to pay tax on your income, in other words what you earn from selling goods and services. However, you can deduct all your business expenses from your income before you pay taxes.
This lowers your overall tax bill.
However, remember that the fact that you’re paying tax, means you’re making money. If your costs are higher than your income, you won’t have to pay tax, but you also won’t earn anything from your business.
Common tax deductions
Common tax deductions for small businesses, freelancers, contractors and self-employed individuals are:
- Advertising and marketing costs, for example advertising on Google or Instagram
- Insurance costs
- Costs associated with company cars, or travel expenses
- Costs for a home-office or to rent an office or retail space
- Salaries and other wage costs
- Bank and card fees, and interest you have to pay on loans
You have to document all your tax deductions with invoices, receipts, or other valid sales documents, also called source documents. If it’s not clear from the document how this expense relates to your business, you should write a note on it and sign it by hand.
It’s a good idea to store your documents in an electronic format, so that they’re safe from fire, water damage, theft, or simply misplacements.
Help with tax
If you need help with your bookkeeping, you can always get help from an accountant. They can help you with bookkeeping, and answer questions about taxes and applicable deductions. They can also help you ensure that you back up your deductions with sales documents.
If you want help with taxes specifically, you can consider reaching out to a tax advisor. They can help you claim tax deductions, file and pay taxes, and reduce your tax bill within the legal framework.