Sole proprietorships, which are one of the most common types of business, are owned by one person. If you are the owner of a small business or are self-employed, you will be filing as a sole proprietor this year.
It’s hard being a small business owner, and doing your taxes as a 1099 or sole proprietor can be a real challenge. Finding the right forms, crunching numbers and even not knowing whether or not you’ve missed possible deductions can leave you feeling overwhelmed and frustrated.
As a small business owner, you want to keep as much of your own money as possible, which means making the most of the deductions available to you. If you’re new to filing as a sole proprietor or just aren’t sure you’re getting all the deductions you deserve, here are a few deductions you may have missed:
- Health insurance deduction: Did you know that, as a sole proprietor, you can deduct the cost of health insurance not only for yourself, but for your dependents as well? The health insurance deduction is what we refer to as an above-the-line deduction, which means it is taken off of your gross income, which amounts to more money being put back in your pocket. Keep in mind, however, that your deduction is limited by the amount of your taxable income.
- Business expense deductions: Every business has operating expenses, even if you are a business of one. The IRS will let you deduct certain expenses when filing your taxes, as long as they are considered ordinary and necessary for your business. Some common examples of business expense deductions would be equipment, capital assets, travel costs and even meals. If you work from home, you can claim a home office deduction as well. Just keep in mind that, in the case of an audit, the IRS may want to see proof of expenses, so it’s essential that you keep receipts and records of business purchases and operating costs.
- Startup cost deductions: If your sole proprietorship is new this year, depending on the type of business you have, you may be able to deduct certain startup costs. Although not all overhead costs are deductible, certain up-front expenses may be. Some examples of deductible startup costs would include licenses and permits, opening inventory, advertising costs and even furnishings and utility deposits.
If you’re a sole proprietor, you don’t want to miss out on any deductions that could help put some of your hard-earned cash back in your pocket. By following these few tips, you can help ensure that you are getting all the tax deductions available to you. However, if you want to guarantee that your taxes are filed correctly and you’re taking advantage of all the deductions, contact Craig S. Hanson, CPA. We specialize in helping sole proprietors make the most of deductions and claim their maximum refund. To learn more about our tax service in Jamestown, ND, call today to schedule a consultation and get your questions answered.