17+ Tax Write-Offs for Your LLC: Ultimate Guide for 2023
Everyone likes free money, and as a business owner, you can get just that with tax write-offs for your LLC.
A tax write-off is a legitimate business expense that can be deducted from your annual LLC income, resulting in a lower tax liability.
While this sounds like an easy way to save money on taxes, the reality is that there are specific rules that business owners must follow.
In this article, I’ll cover everything you need to know about LLC tax write-offs and the various rules surrounding this topic.
If you’re planning on starting a business in the future, or want to maximize your current business deductions, keep reading to learn more.
Here are the best tax write-offs for your LLC.
Businesses need to get the word out about their services and products.
Advertising expenses generally include any promotional material to inform customers or potential customers about your services.
From business cards to websites and pamphlets, advertising can lead to a tax write-off for associated expenses.
Business travel is a necessary expense for many businesses.
Small business owners can write off such traveling at a standard mileage rate set by the Internal Revenue Service (IRS) when traveling by car.
Car expenses include fuel and oil costs, repairs, maintenance, insurance, and other related fees.
Remember that any trip must be necessary for your business to qualify for a tax write-off.
Said differently, you can deduct certain travel expenses as long as the travel is not for personal use.
The actual expenses generally have to be for longer than one working day and require the business person to rest or sleep while on the journey.
Insuring your business for various risks is essential to its survival.
This cost can be a tax write-off as it is essential to running a business.
If you work from home, remove personal insurance coverage from the equation, and what remains can be a tax write-off.
Charitable contributions can account for a significant portion of your business expenses.
Done by big and small companies, charitable donations are a great way to help others while taking advantage of the tax benefits available.
Having the right business checking account as an LLC can prove that the business owner withdrew funds from the business bank account for charitable purposes.
The cost of goods sold (COGS) is an essential factor in what a business owner takes home at the end of the year.
COGS includes materials used in production and any other expenditures related directly to producing goods for customers.
Education is a legitimate expense that allows a small business to stay up-to-date on the latest trends and technologies in its field.
Entrepreneurs incur education expenses when attending seminars, conferences, or workshops related to their industry or profession.
One can consider training a tax deduction if it pertains directly to your work area.
Various businesses have different dependents based on the size of their workforce.
Employees come with additional costs, such as workers’ compensation insurance and other employee benefits, which are all tax deductible.
Some companies use freelancers and independent contractors, so these write-offs might not apply.
The Jobs Act provides information about these various areas of business.
If you run a business from home, you can deduct certain expenses like electricity, internet, and other things necessary to run your business.
With the correct paperwork in place, one can very well write off this expense and save some money on their taxes.
Businesses often take out loans to finance capital investments or operations costs.
Owners can deduct the interest payments made on such a business loan.
Professional fees for accountants, attorneys, and other related expenses can be considered business expenses and thus tax deductible.
As such, these professional services can be tax write-offs for LLCs, partnerships, and other business entities.
Companies pay business tax on salaries and wages that they pay out to employees.
That said, some rules govern what types of salary payments are business expenses.
These rules state that the employee cannot be the sole proprietor, a partner, or a limited liability company member.
In addition, their salary must be necessary and reasonable for their job function.
Software and subscription fees are essential to running a successful business in most industries.
Keeping track of these expenses is vital.
In doing so, owners can take advantage of the tax deductions associated with these services.
Real estate taxes can include various costs related to owning property.
For example, property taxes, HOA fees, or maintenance fees all fall under this category.
One can write off property taxes up to a maximum of $10,000.
One fundamental business property is the company’s website.
A website incurs costs related to its design, hosting, domain registration, SSL certificates, etc.
Business owners can write off these associated costs as long as they are directly related to the core mission of their business.
Other potential write-offs may apply depending on the business use and industry.
Here are a few additional ones to consider:
- Credit card: as businesses pay for expenses with a card, they can write off the credit card fees.
- Depreciation: businesses can depreciate assets such as buildings or business equipment over their useful life.
- Health insurance premiums: Expenses related to employee health benefits may also be deductible.
- Mortgage interest: If a business owns a property, it can write off mortgage interest payments made on that property.
- Business Meals: Everyone needs to eat, and business-related meals can be deducted for tax purposes.
Here are some key terms business owners must know about related to taxes:
- Tax bill: This is the total amount of taxes due to the government, calculated based on income, deductions, and credits.
- Tax filing software: The right software can make filing taxes easier by helping to organize all the relevant information for business purposes.
- Tax purposes: Business owners must understand what expenses are deductible for tax purposes and which aren’t.
- Tax credit: This is a dollar-for-dollar reduction in tax liability that can reduce the amount of taxes owed or increase the refund amount.
- Tax filing: This is when businesses submit their annual income tax return with relevant documents to the Internal Revenue Service (IRS).
- Tax rate: The tax rate refers to how much of a taxpayer’s income will be taxed, expressed as a percentage. Different tax rates apply to varying levels of income.
As business owners pay taxes, they may be eligible for tax deductions.
A tax deduction is a reduction of taxable income that can reduce the amount of taxes owed to the government or increase the refund amount.
The taxpayers should check with their accountant or financial advisor to determine which deductions they qualify for and how to claim them correctly.
Being self-employed as a sole proprietor means there are unique tax considerations to consider when filing taxes.
With self-employment taxes for sole proprietorship and other small businesses, business owners must pay the employer and employee portion of Social Security and Medicare Taxes.
Business owners use a Schedule C form to report income or loss from a sole proprietorship.
Bookkeeping can be complicated, and it is essential to have the proper tax professional support.
As business income and expenses increase, a CPA can differentiate deductible expenses and help business owners claim those deductions correctly on their taxes.
These deductions will mean paying less income tax to the IRS and having more money left over for investments or operational costs.
The right CPA will know about further tax benefits, helping business owners ensure they are not leaving any money on the table when filing taxes.
A higher gross salary can mean paying more taxes because of higher tax brackets.
Yes, they do, as businesses can benefit from tax cuts.
Tax cuts reduce the taxes businesses have to pay, which can help increase cash flow and stimulate economic activity by allowing companies to use more of their profits for investments or other business activities that will help them grow.
Yes, there are some differences in LLC tax deductions compared to corporate income tax returns.
One can claim deductions such as start-up costs and self-employment taxes for LLC members but not corporations.
Additionally, some business expenses, such as health insurance premiums, may be deductible for LLCs but not corporations.
Small business tax dictates that businesses can write off expenses related to their business operation.
These include office expenses and supplies, advertising and marketing costs, business insurance, travel expenses, rent or mortgage payments for business property, payroll costs, employee benefits, and more.
Expenses such as business insurance and health care premiums may qualify for a full tax deduction if they are considered necessary for the running of the business.
A 1099 form helps small business tax deductions by providing additional information to the IRS about payments made to independent contractors or freelancers.
Writing off the tax from previous years depends on several factors, including the type of business entity, taxable income for the tax year, and whether you itemize deductions on your tax return.
Note that one can’t deduct federal taxes paid during the previous year.
The tax season can be overwhelming for business owners, but with the proper planning, it doesn’t have to be.
By understanding the different types of taxes one has to pay and being aware of available deductions, businesses can ensure that they are paying their fair share in taxes while maximizing their savings potential.
Are there any tax write-offs I missed?
Do you prefer to do your business taxes or hire a CPA?
Let me know in the comments below.
Further reading on AdamEnfroy.com: Thinking about starting an LLC?
The above post will get you up to speed with everything you need to know about this type of business entity.
Finally, check out these business ideas if you want inspiration for starting a business.