Bandicoot | Accounting Solutions

ADVICE FOR SMALL BUSINESSES

The Hidden Tax Savings: Are You Missing Out on Deductible Expenses?

As a small business owner, every dollar counts—especially during tax season. Yet, many businesses miss out on valuable tax savings because they fail to identify and claim all eligible deductions. From overlooked expenses to poor documentation, the hidden savings in deductible expenses can make a significant difference in your bottom line. Here’s how to uncover those hidden tax savings and ensure you’re maximizing your deductions.

 

  1. Home Office Expenses
    If you use part of your home exclusively for business purposes, you may be eligible for a home office deduction. This often-overlooked expense can cover a portion of your rent or mortgage, utilities, and maintenance costs.

 

What to Deduct:

  • Rent or mortgage interest.
  • Utilities like electricity, internet, and water.
  • Repairs and maintenance for the workspace.

 

How to Claim It:

  • Use the Simplified Method (deduct $5 per square foot, up to 300 square feet).
  • Opt for the Actual Expense Method to calculate the percentage of home expenses used for business.

 

  1. Business Vehicle Expenses
    Whether you’re driving to client meetings or running business errands, vehicle expenses can add up. Many small business owners forget to track and deduct these costs.

 

What to Deduct:

  • Mileage driven for business purposes.
  • Gas, maintenance, and repairs.
  • Insurance and registration fees.

 

How to Claim It:

  • Use the Standard Mileage Rate (e.g., 65.5 cents per mile for 2023).
  • Opt for the Actual Expense Method if you keep detailed records of all vehicle-related expenses.

 

Pro Tip:
Apps like MileIQ or Everlance make tracking mileage effortless.

 

 

  1. Meals and Entertainment
    Business meals and some entertainment expenses are deductible, but they must meet IRS criteria. Documentation is key to claiming these deductions successfully.

 

What to Deduct:

  • 50% of meals with clients or business partners where business is discussed.
  • 100% of meals provided to employees for workplace convenience (e.g., during meetings).

 

How to Claim It:

  • Keep receipts with details of the meal, participants, and purpose.
  • Categorize these expenses in your accounting software for easy tracking.

 

  1. Technology and Software
    From accounting software to laptops and cloud subscriptions, technology expenses are often deductible. Many small businesses miss these deductions because they fail to track these purchases effectively.

 

What to Deduct:

  • Software subscriptions (e.g., QuickBooks, Adobe, or Zoom).
  • Hardware purchases (e.g., computers, printers, or phones).
  • Cloud services and website hosting fees.

 

How to Claim It:

  • Record these expenses under “Office Expenses” or “Technology” in your books.
  • Depreciate high-value items like laptops over time if required by the IRS.

 

  1. Professional Development
    Investing in yourself or your employees through education and training can be tax-deductible.

 

What to Deduct:

  • Fees for industry-specific courses or certifications.
  • Books, online subscriptions, and training materials.
  • Travel expenses for attending conferences or seminars.

 

How to Claim It:

  • Keep receipts and proof of payment.
  • Ensure the training is directly related to your business.

 

  1. Marketing and Advertising
    Promoting your business is essential for growth, and the associated costs are fully deductible.

 

What to Deduct:

  • Social media ads and search engine marketing.
  • Business cards, flyers, and other promotional materials.
  • Website design, hosting, and maintenance.

 

How to Claim It:

  • Track all marketing expenses in a dedicated category within your accounting system.
  • Retain invoices or receipts for these services.

 

  1. Retirement Contributions
    Small business owners can deduct contributions to their retirement plans, reducing taxable income while planning for the future.

 

What to Deduct:

  • Contributions to a SEP IRA, Solo 401(k), or SIMPLE IRA.
  • Employer contributions to employee retirement plans.

 

How to Claim It:

  • Work with a financial advisor or CPA to calculate and document contributions.

 

  1. Unpaid Invoices (Bad Debt)
    If you’ve provided goods or services and didn’t get paid, those unpaid invoices might qualify as a deduction.

 

What to Deduct:

  • The amount of income you initially reported but couldn’t collect.

 

How to Claim It:

  • Record the bad debt in your books and report it on your tax return.
  • Keep documentation showing efforts to collect the debt.

 

  1. Employee Benefits
    Providing benefits to employees can qualify as deductible expenses while boosting morale and retention.

 

What to Deduct:

  • Health insurance premiums.
  • Paid leave, bonuses, and employee gifts.

 

How to Claim It:

  • Ensure these expenses are categorized under “Employee Benefits” or similar in your accounting system.

 

  1. Miscellaneous Expenses
    Some costs don’t fit neatly into a specific category but are still deductible. Keep an eye out for these often-overlooked expenses:
  • Bank fees for business accounts.
  • Membership dues for professional organizations.
  • Interest on business loans or credit cards.

 

Maximize Your Tax Savings with These Tips

 

Track Everything in Real-Time: Use accounting software to automate tracking and categorization of expenses.

 

Keep Detailed Documentation: Retain receipts, invoices, and contracts for all deductible expenses.

 

Work with a CPA: A tax professional can help you identify deductions you may not have considered.

 

Conduct Regular Reviews: Periodically audit your books to ensure no expenses are missed or miscategorized.

 

Final Thoughts
Missing out on deductible expenses means leaving money on the table. By staying organized, leveraging technology, and working with a tax professional, you can uncover hidden savings and maximize your tax deductions.

 

At Bandicoot, we specialize in helping businesses optimize their financial systems and tax strategies. Contact us today to learn how we can help you identify and claim every eligible deduction, ensuring your business keeps more of its hard-earned revenue.





N. Cace

Senior Associate @ Bandicoot