What to include in your small business tax deductions plus: Checklist!
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When you start a small business, you might not have everything figured out. You might have to wait for the money to come in to buy the extras that can improve your business.
It would be best if you were keeping an eye on all your transactions.
It is said that non-finance people when they think of record keeping, they only think of only the Income 🙂 Of course it is a joke! Please just make sure that all the transactions are considered when you do your record keeping. The income, the expenses – which means the overall cashflow, as well as the movements of goods and services. It can hurt you once tax season comes around, and you’re a jumbled mess.
If you are using an accounting software, please make sure that it links to any bank accounts you might have used for your small business so to avoid omitting some transactions. Categorization must be correct so that the tax deductions are also done correctly for you.
The golden rule is to please separate your personal affairs or finances from that of the business.
Regular record keeping also lets you do a mock tax write-up to see how much you might need to contribute to your taxes. That way you will be able to save up for your future taxes. Small businesses contribute twice for the taxes during the year whether they make enough money or not.
There are a few expenses that small business owners get confused about regarding their tax deductions.
1. Utilities/bills
Just like any rental expense, a portion of the utilities and bills, like wi-fi and telephone bill, can be included in your small business tax deductions.
Suppose you regularly use your utilities and bills as part of your small business. In that case, you can put them towards your tax deductions. Like a typical office workspace, you can include water, electricity, trash, phone bills, and the internet as part of an overhead expense. Expenses are recorded on the Profit and Loss section of your annual reports. which means your profit, which is called the taxable income by SARS would have taken the expenses into account prior the final figure.
2. Software
As a businessperson you make use of different software programs to keep your small business running. Like Adobe Creative Suite, some are vital, while others, like website hosting, help drive customers to the business website and indirectly affect your cash in the business.
You may overlook such type of expenses, but they are big considering how many programs are vital to managing a small business.
3. Vehicles
Vehicles are a bit of a grey area for small business tax deductions. Not only can you contribute a portion of your vehicle’s cost if you use it for work. You can also include gas, polls, maintenance, insurance, and mileage.
Suppose you’re a creative business owner that needs to go places, like a wedding photographer. In that case, you should claim your car as a portion of your tax-deductible.
4. Travel
Not only is your vehicle a part of your small business tax deductions, but other traveling expenses might qualify too. If you are traveling more than 100 miles a day for business, you can also claim lodging, flights, and meals.
Vehicles will have you track your mileage as well. Still, if you have any expenses that cause you to travel extensively for work, you can claim them as part of your tax deductions. Don’t go overboard and pay for a first-class ticket and extravagant meals towards the deduction. Still, you can put some of your expenses towards your taxes.
5. Contractors / Sub-contractors
Some businesses depend on few contractors to help them guide and develop your small business. Every time you have consulted with them; their fees have will contribute into the small business tax-deductible. You can also include these expenses when you hire subcontractors regularly for your business as well.
Usually, paying someone can be a hefty expense, so it’s no surprise that hiring help can pay off in the end.
6. Education
Education can be tricky when it comes to small business tax deductions. Learning more about being a small business owner is a significant endeavour, like purchasing business books, training skills and development programs and other materials for building a story brand. You can include all these to contribute to your tax deductions.
Ensure that your educational tax deductions apply to the industry that your small business is involved in.
7. Office supplies
Please include all your office supplies in your list of your expenses for the tax deduction purposes.
You can include anything that helps you run your business
8. Office furniture
To claim a portion of your home, you should have a space of your own to claim as your office space, even if it’s just a desk and a chair.
Even if you have more than a desk and chair, you’re able to claim your office furniture as a tax deduction. Business owners can also include the computer monitor in their home furniture because it helps you run your small business.
9. Staff Refreshments and Meals
You might have a meal, or a Starbucks run to meet with a client or a contractor. Don’t fret. These can go towards your small business tax deductions.
Don’t meet at the most elegant venue near you, but an inexpensive meal can be used and claimed as a business expense. Even if you are hosting a party, you can deduct the cost of the food you buy for your tax deductions.
You might not consider your expenses to be extraneous to run your small business, but everything counts when getting your taxes done right. Keeping track of your expenses with an accounting software or hiring a bookkeeper or accountant to keep track of anything, is well worth the investment to know you are doing everything you can to do things right.
As a small business owner, it’s helpful to know you have a lot of options to contribute to your tax deductions for your small business. Knowing your options can help make your tax deductions seem more plentiful than when you started your business.
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Registered Accountant and Certified Tax Practitioner.
If you need a consultation with us with regards to your business, any type of business – please reach out to us on email hello@matsobanemetja.blog
Matsobanemetja Business Consulting (Pty) Ltd offers a wide range of bookkeeping and accounting services, tailored to your business needs at an affordable price.
You may please inquire with us by sending an email to enquiries@matsobanemetja.co.za
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