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Are you missing these 5 small business tax deductions?

As with any profession, it鈥檚 important that financial professionals keep up with the latest industry news, including how ever-evolving tax laws affect their business. While taxes can鈥檛 be escaped, there are ways to help lessen the impact. When it comes to managing your own firm鈥檚 tax situation, remember these that affect businesses in addition to the .

Double check the latest deductions

Tax reform under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017 affected nearly every business and individual in 2018 and the years ahead. With the reform, your business expenses may have been taxed differently over the past few years. Since the provisions remain effective through the end of 2025, you鈥檙e still allowed to write off standard business expenses, such as marketing, business equipment, employee costs and financial planning software.

Review these five small business tax deductions to help make the most of the provisions in place. They may impact how you file.

1. Depreciation of assets:

Small business owners can immediately write off more property expenses, and that includes certain improvements to a building鈥檚 interior, roof, HVAC systems, fire protection systems, and alarm and security systems. What鈥檚 more, the deduction ceiling increased from $500,000 to $1 million. 

In the first year, businesses could deduct 100 percent of the cost of certain eligible property acquired and placed in service after September 27, 2017, and before January 1, 2023. The 100 percent allowance began phasing out after the 2022 tax year and expires January 1, 2027.
 

2. Accounting method:

Businesses with average annual gross receipts of $25 million or less for the last three years can use the cash method of accounting, so your taxes can reflect only real profits.

3. Meals and entertainment: 

Entertainment expense deductions were mostly eliminated. However, you can still write off 50 percent of client meals if you stay within specific IRS criteria.

4. Employer credit for paid family or medical leave:

Business owners can deduct up to 25 percent of wages for qualifying employees for up to 12 weeks per taxable year. Because there are specific rules for calculating the percentage, please consult your tax advisor. Thanks to the Consolidated Appropriations Act of 2022 (CAA), this tax credit extends through 2025.

5. Commuting costs: 

The TCJA cut any tax deductions for commuting costs for you and your employees 鈥� with one exception. If any of your employees bike to work and you have a program in place to reimburse them for their bicycle commuting expenses, those costs can be deducted as a business expense through 2025.

Reassess your business entity

Perhaps the biggest change with this tax reform is related to how you set up your business. Self-employed financial professionals who earn less than or equal to $191,950 in tax year 2024 (or $383,900 for those filing joint returns) can potentially qualify for a 20 percent qualified business income (QBI) tax deduction.

S Corp 

If your business is structured as an S Corp, you aren鈥檛 necessarily required to pay additional business taxes on top of your personal taxes. If you are in the top income bracket, which has a 37 percent tax rate, then your personal tax rate will top out at 29.6 percent after the 20 percent reduction. 

Partnership or sole-proprietorship LLC 

If your business is set up as a partnership or sole-proprietorship LLC, which usually acts as 鈥減ass through鈥� entities that don鈥檛 require ownership taxes, you may qualify for the 20 percent deduction.

C Corp 

If your business is a C Corp or another structure that requires business taxes, you won鈥檛 qualify for the 20 percent deduction. However, there may be other cuts designed for corporations that could help decrease your tax burden. TCJA requires a flat 21 percent tax for C Corps on top of your personal taxes.

Considering if your business entity is still the right choice may help you save the most on your taxes. In addition to these deductions, there are TCJA rules on business losses, interest expenses and alternative minimum taxes.

Two things you can do today

1. Visit the , and review your business deductions from last year with your tax advisor.
2. Review the structure of your business entity against the newest and .

Given reform from the Tax Cuts and Jobs Act and with some deductions potentially expiring, consulting with your tax advisor is the best way to make sure you aren鈥檛 missing out on any tax savings.

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Any information regarding taxation contained herein is based on our understanding of current tax law, which is subject to change and differing interpretations. This information should not be relied on as tax, legal or financial advice and cannot be used by any taxpayer for the purposes of avoiding penalties under the Internal Revenue Code. We recommend that taxpayers consult with their professional tax and legal advisors for applicability to their personal circumstances.