Understanding Tax Deductions: A Guide for Small Businesses

What is a Tax Deduction?

A tax deduction lowers your taxable income, which in turn lowers the amount of tax you owe. Essentially, the IRS allows you to subtract certain business expenses from your total income.

Common Deductions for Small Businesses

• Home Office: If you use a portion of your home exclusively for business, you can deduct a percentage of your rent, mortgage interest, utilities, and insurance.
• Vehicle Earnings: You can deduct expenses for using your car for business purposes, either by tracking actual expenses or using the standard mileage rate.
• Supplies and Equipment: Computers, printers, software (like SimplyLedger!), and office supplies are generally deductible.
• Professional Services: Fees paid to lawyers, accountants, and consultants are deductible.

Keep Good Records

The golden rule of tax deductions is documentation. If you can't prove it, you can't deduct it. Keep receipts, bank statements, and invoices organized. SimplyLedger's receipt scanning feature makes this effortless.