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Tax Deductions for Small Business Owners

Small business owners make up the bulk of American businesses. According to the Small Business Administration, in 2010, there were nearly 28 million small businesses, making up 99.7% of U.S. employer firms. More than 50% of the small businesses were home-based, and nearly 75% were sole proprietors. The vast majority of Maryland businesses, then, can benefit from taking a closer look at some of the following tax deductions:

Home office deduction

During National Small Business Week this past spring, the IRS reminded home-based business owners to take a look at the home office deduction. There are two calculation options available. The regular method divides the home operation expenses between business and personal use. The simplified method assigns a value of $5 per square foot, up to 300 square feet, for business use of the home.

Insurance costs

Many people know that health insurance costs may be subject to a tax credit (for portions of a plan purchased for employees) or deductible on the business owner’s personal tax return. However, other insurance costs are deductible as well. The cost of your business liability policy, worker’s compensation, and even flood insurance may be deductible. Speak with a tax professional to understand which insurance costs may be deductible in your situation.

Advertising and marketing

So long as it is for the direct benefit of the business, advertising and marketing expenses are fully deductible. Included are everyday expenses like printing business cards and less common expenses like sponsoring a baseball team.

Professional fees

If you are running a business, it probably makes sense to rely on the expertise of professionals like attorneys, accountants, and consultants. The costs for these professionals are fully deductible.

Independent contractor expenses

Many small businesses thrive by relying on independent contractors for labor. The cost of hiring a freelancer is deductible, but be sure to comply with wage and reporting requirements.

Making the most out of your small business tax deductions

Making use of the available tax deductions is one of the most important aspects of tax planning. It is also crucial to understand your legal rights and the implications of deductions you claim in case of future audit. Therefore, it is wise to work with an accountant who understands your business and to work with a tax attorney who knows the current tax laws. These investments are critical to the health of any growing business.

For small business owners in Maryland, Delaware, and throughout the mid-Atlantic region, the tax attorneys at Rosenberg Martin Greenberg are here to help. We focus on helping businesses navigate the complex landscape of tax law, and we understand what matters to you. Call and speak with one of our Baltimore-based attorneys to see how we can help you put your business first by taking advantage of the tax benefits available to small businesses.

Additional Small Business Tax Resources:

  1. IRS, IRS: Home Office Deduction Often Overlooked by Small Business Owners, https://www.irs.gov/newsroom/irs-home-office-deduction-often-overlooked-by-small-business-owners
  2. SBA, Frequently Asked Questions, https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

Rosenberg Martin Greenberg

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Phone: 410-727-6600
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Rosenberg Martin Greenberg

705 Melvin Avenue Annapolis, MD 21401
Phone: 410-727-6600
Map & Directions