As part of an effort to mitigate the effects of the spread of the coronavirus known as COVID-19, the Internal Revenue Services has chosen to delay the April 15, 2020 tax filing deadline for most individual taxpayers and businesses to July 15, 2020. Regardless of the deadline, one thing that isn’t expected to change anytime soon is what a business can and cannot claim as a tax deduction. And in today’s post, we offer insight into exactly that — what small businesses can and cannot deduct, regardless of the tax filing deadline.

A deduction (or write-off) is an expense or portion of an expense subtracted from your company’s gross income that reduces the income on which taxes are calculated. Every dollar you claim as a deduction is a dollar less that is subject to federal, state, and local income tax and self-employment tax (Social Security and Medicare).

For example, if your effective federal income tax rate is 25 percent, and you pay 15.3 percent in self-employment tax and 5 percent in state and local income tax, every thousand dollars less you report in taxable income is over 450 dollars you save in taxes: (0.25 + 0.153 + 0.05) x $1,000 = 0.453 x $1,000 = $453.

The Tax Cuts and Jobs Act (TCJA), which became effective in 2018, made it less advantageous for taxpayers to itemize personal deductions. However, if you own a small business — such as a sole-proprietorship, limited liability company (LLC), or partnership — you can deduct a broad range of business expenses to lower the taxable income you earn from that business.

Here are a couple tips for claiming business deductions without getting into legal trouble:

• Seek confirmation from a tax specialist or certified public accountant (CPA) before claiming any business expense as a deduction.
• Keep accurate, detailed records, including invoices and receipts for all business expenses. (Your CPA can help you find accounting packages and apps to simplify your record-keeping.)

In the following sections, we present a long list of common small-business tax deductions. Continue reading… Continue reading… Continue reading…