Key Tax Deductions & Tax Credits for Businesses to Know

As the year progresses, it is crucial for business owners to evaluate their tax strategies proactively. Mid-year is an ideal time for reassessment—an opportunity to strategize for tax savings while there's still ample time to make impactful changes. Thoughtful planning can reveal powerful deductions and credits, and it's timely because some of these benefits may soon expire. Navigating the complex labyrinth of tax law can be challenging, but with the right knowledge, business owners can gain clarity and control over their financial future.

Qualified Business Income Deduction

Eligible for sole proprietors, partnerships, S-Corps, and LLCs, the Qualified Business Income Deduction offers a significant 20% deduction opportunity. With this provision set to expire at the end of 2025, swift action is essential. Making the most of this deduction aligns with a savvy tax strategy that can considerably reduce taxable income.

Home Office Deduction

If you use a portion of your home regularly and exclusively for business purposes, you may qualify for the home office deduction. This allows you to deduct a portion of your rent, utilities, and internet bills, transforming part of your home expenses into business savings.

Meals and Entertainment Deduction

While the Meals and Entertainment Deduction might seem straightforward, it's important to note that meals with clients or employees will remain 50% deductible in 2025. Business meals that directly relate to or precede/follow a substantive business discussion can still qualify, enhancing the value of relationship building activities.

Research and Development Tax Credit

Contrary to popular belief, the Research and Development Tax Credit is not limited to tech companies. If your business is engaged in activities that lead to the improvement of products or processes, you may qualify for this beneficial credit. Don't overlook potential credits due to misconceptions.

State and Local Tax Deductions (SALT)

The SALT cap is a challenge many businesses face, but PTE elections offer a viable strategy for pass-through entities. By electing to pay state taxes at the entity level, businesses can navigate the federal $10,000 SALT cap more effectively, potentially reducing their federal taxable income.

Section 179 Deduction and Bonus Depreciation

Businesses can leverage the Section 179 Deduction to deduct the full purchase price of qualifying equipment and software. Additionally, bonus depreciation allows for significant write-offs on both new and used assets, making now the right time to invest in essential business tools ahead of anticipated needs.

Business Vehicle Expenses

Managing vehicle expenses can lead to substantial deductions. Business owners have the option of deducting actual expenses, including gas and maintenance, or using the standard mileage rate. Keeping a detailed mileage log is essential regardless of the method chosen, ensuring maximum allowable deductions are captured.

Every business is unique, and not every deduction will apply. However, mid-year is a smart time for a tax check-in. It’s worth considering professional tax planning to tailor a strategy specific to your circumstances. Take action today by reviewing your current approach or scheduling a consultation to explore the potential tax savings awaiting you.