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Graham Hunter is a resident tax nerd at GoodApril, Tax-Planning for freelancers. GoodApril helps people save money and avoid April tax surprises.

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5 often missed tax deductions for small businesses

Guest article by written by of GoodApril on Jul 21
missed tax deductions

Taxpayers are usually hustling to finish their tax returns at the last minute. So, get a jump on tax season and check out these five deductions to keep in mind. One thing to note is that deductions (as opposed to credits) can only be taken if you are itemizing your deductions.

Alright, now that you know, onto the missed tax deductions!

Lifetime Learning Credit

There’s no class too small. Want to take a class on basket weaving or a course to improve your job skills? That’s deductible. You can claim 20% of the first $10,000 in eligible costs for a maximum of $2000 per year. There is one big exception though; The institution where you take the classes must be accredited. So online courses don’t count, sorry.

Business Travel Deductions

Whether you are headed to a conference or going on a longer trip for work, travel expenses for business are mostly deductible. The biggest rule here is that expenses can’t be extravagant. If you are driving, you can deduct the standard mileage of 56.5 cents/ mile (in 2013). But what if you are on a longer business trip or even have to move to a new city temporarily? As long as your assignment is less than a year, you are still “travelling” and most of your expenses will be deductible. Meals and entertainment are only deductible at 50% (because you’d still have to eat even if you weren’t travelling). If you are an employee there is one last big exception, and that is that you can only deduct expenses that exceed 2% of your income; Good news for the self-employed!

State Tax Deduction

As a federal taxpayer, you have the choice of deducting either state income tax or the state sales tax that you paid. Because you probably didn’t keep every receipt, the IRS has a handy calculator to help you calculate your sales tax deduction. Some states make it easy as they have no income tax but if do pay state income taxes, make sure to compare both numbers to maximize your deduction.

Health Coverage Tax Credit & Self-employed Health Insurance Deduction

If you are self employed then you can deduct 100% of the health insurance premiums that you paid for you and your dependents. But don’t worry,, If you are an employee you can still get a tax break for the insurance premiums that you’ve paid too. The Health Coverage Tax Credit (HCTC) allows you to get a credit for 72.5% of the premiums that you paid. The great thing about this credit is that it is refundable, meaning that even if you owe $0 in tax you can get money back.

Non-cash Charitable Contributions Deduction

Who hasn’t taken a few bags of old clothes to Goodwill? When you do, make sure to keep your receipts and you can take a deduction. Generally, you can claim the “fair market value” of the items that you donate. However, there are all sorts of ways that the IRS “fair market value” so make sure to check out pub. 561 if you have questions.

So, make sure that you are keeping track of business expenses, donations and health insurance payments. it can be a pain to keep track of all of those scraps of paper, but they can really pay off. If only there was some way to do less accounting ;)

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