Over the course of a year, your business will incur a lot of expenses. As a marketing professional, many of these expenses are necessary for the advancement of your business. And since they are necessary and ordinary expenses, many of them qualify as small business deductions. Deductions can be a real lifesaver come tax time, as they help lower your taxable income, which in turn lowers the amount you owe in taxes. The following are some of the best small business tax deductions for marketing professionals.
Advertising And Marketing Deductions
As a marketing professional, you fully understand the importance of advertising and marketing. How you market and advertise your business has a huge impact on the growth of your business. And since it is a necessary and ordinary expense, the money you spend on marketing qualifies as a small business deduction. Various marketing activities can qualify as a deductible expense including:
- Paid per click ads
- Social media
- Affiliate marketing
- Web design and maintenance
- Web hosting fees
- Domain name registration
- Content marketing
- Radio ads
- TV ads
- Business cards
You may also be able to include the costs of meeting with prospects and meals associated with sales. The costs of client acquisition are also deductible. So, that coffee you bought when you met with that new potential client is completely tax-deductible.
Sometimes it is important to outsource to other professionals. As a marketing professional, you probably have a group of other professionals you like to work with on a regular basis. For example, if you like to work with a web designer or outsource your content strategy to a freelance content specialist these are considered necessary and ordinary business expenses that are tax-deductible. In addition, if you work with a tax advisor or financial planner throughout the year, these professional fees are also deductible.
Technology And Equipment
Staying up to date on the latest in technology is important in order to remain competitive. Due to the technological nature of marketing these days, having the right tools is crucial. From CRM software to cloud analytics, it is all technology-based. And since technology moves at the speed of light, it is only natural to incur regular technology expenses throughout the year. This includes:
- Specific software related to your business
As we mentioned above, a lot of things are technology-based, which has paved the way for a lot of cloud-based business applications. Some of which are free, while others may charge a subscription fee. These fees can vary depending on the level of service you require. For example: if you use Quickbooks for your accounting, there are several options available with monthly subscription costs. Or if you use a cloud-based analytics service with a monthly service fee, this service fee is a necessary business expense and therefore qualifies as a deductible expense. Subscription or monthly fees that are deemed pertinent to your business are considered deductible expenses.
Business operating costs can really add up over the year. From office supplies to shipping charges, many of your regular monthly operating costs qualify as tax deductions. Some examples of operating costs that qualify as a tax deduction include:
- Home office
- Utilities – including electricity and water
- Internet expenses
- Office supplies
- Business insurance
- Salaries and Employee Wages
- Employee benefit programs
- Vehicle expenses
- Interest on business debts
Other Tax Deductions You Can Take Advantage Of
There are a lot of tax deductions available to small businesses that can help lessen their tax burden. Many of which offer other enrichment benefits to the taxpayer as well. For example the travel deduction. If you travel for business, your business travel expenses are tax-deductible. This includes airfare, hotel accommodations, rental car, and even meals. Continued education also qualifies as a deductible expense. The cost of attending a class, seminar,or conference are tax-deductible including the cost of entry, supplies, and even travel expenses. Both of these tax deductions offer businesses the opportunity to sharpen their skills and remain competitive while reaping the tax benefits.
Another important tax deduction to consider is the IRA contribution tax deduction. This deduction is an above the line deduction, which means you can take advantage of it even if you do not itemize your taxes. With this deduction, you can deduct up to the maximum contribution amount, which for 2019 just went up to $6,500 per year. You also have until tax day of the following year to make a contribution for the previous year. This is a great tax deduction for small business owners or the self-employed, as it not only helps decrease your tax burden but also helps set up your financial well being.
Another above the line tax deduction that can really benefit small business owners and the self-employed is the self-employed tax deduction. If you are self-employed, then you are probably familiar with the self-employed tax. The self-employed tax accounts for your portion and the employer portion of Social Security and Medicare taxes. The self-employed tax rate is 15.3%, with 12.4% going towards Social Security and 2.9% going towards Medicare. The self-employed tax can really sting come tax time, however, it does qualify as a small business tax deduction, which in the end can reduce your tax obligation.
Some Important Things To Consider
When it comes to paying taxes, you have several options: to itemize or take the standard deduction. Many businesses elect to itemize because their itemized deductions are greater than the standard deduction. However, there have been some recent changes to the standard deduction as a result of the Tax Cuts and Jobs Act. In 2018, the standard deduction for single filers went up from $6,350 to $12,000, for married filers filing jointly it went from $12,700 to $24,000, and for a head of household filers, it went from $9,350 to $18,000. Of course, taxpayers want to get the biggest bang for their buck, so it is important to make sure it makes sense to itemize. Meaning, before you elect to itemize make sure your itemizations are greater than the standard deduction.
Setting Up A Good Accounting Process
Another important thing to consider is your accounting process. Having the right system in place to keep track of expenses can help you manage your deductions come tax time. Keep track of all receipts, and invoices. There are a lot of really great apps available to help small business owners keep track of expenses while they are out and about. This helps ensure that the expenses are being kept track of, and properly categorized. Some of the leading receipt tracking apps include:
- Smart Receipts
- Tiny Scanner
- Office Lens
Employing any of these receipt tracking apps can help save you time, and help keep you organized. In addition, many of the above-mentioned receipt tracking apps also integrate with the leading accounting software, Quickbooks and Xero. This makes expense tracking seamless with your accounting process.
Which brings us to our next point, and that is using the right accounting software. Having the right accounting software for your business is really important. A good accounting process helps you keep track of expenses, keep track of income, balance your books, forecast future income, keep track of assets, invoice, pay bills, account reconciliation, and more. Quickbooks and Xero are two of the leading accounting programs that are both reliable and effective and help you stay organized. Staying organized is the best way to know which tax deductions are applicable to your business. In addition, in the event of an audit, having an organized and well thought out accounting process can act as an added security measure. This way if the IRS has any further questions, you know exactly where to go for the information.
When it comes to small business tax deductions, one of the smartest ways to go about it, is to have a good tax strategy. See taxes don’t begin and end with tax season. It is an ongoing process that takes place throughout the year. This is where working with a good tax advisor comes in handy. A tax advisor can help you plan out your tax year, including planning for deductions. This may involve timing large purchases, timing income, tax savings, making estimated tax payments, and saving for your retirement. All of which are vital to your financial well being.
Tax deductions are one of the best ways for business owners to lower their tax bill. It is important to know which tax deductions are applicable to your business. Don’t leave money on the table by missing out on tax deductions. Talk to your tax advisor today! For more information on tax deductions contact the tax experts at The Tax Hack Accounting Group.
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