Benefits of Starting a Small Business
Starting and running your own small business can be an exciting time in your career path. Not only can starting a small business benefit you personally, but it can also benefit you financially. Small businesses afford its owners several tax benefits to help you reduce your tax liability on an annual basis.
Home Office Deduction
If you use a portion of your home to run your business, you may be able to use a home office deduction on your tax returns. Not only does this include deducting a portion of your rent or mortgage payment, it also includes deducting a portion of your utilities, insurance and repairs. To deduct a home office, you have to have a dedicated space in your home where you run your business. To take the home office deduction, exclusive use of the space must be for business purposes. You also have to show that the home office is the primary location for your business.
Business Use of Vehicle
Even if you personally own your vehicle rather than own it in the name of your small business, you can deduct a portion of your car use, when it is for business purposes. You have the choice of deducting actual costs for gas, repairs, tolls and parking or you can take the standard mileage deduction rate, which as of 2010 is set by the Internal Revenue Service at 50 cents per mile.
Health Insurance Deductions
A small business owner that has a health insurance policy for themselves or their employees may also deduct some of the health insurance costs. You are able to deduct the premium you pay on the health insurance policy. You may also be eligible to deduct out-of-pocket health insurance costs beyond the premium payments.
Retirement Plan Deductions
If you have a retirement plan you contribute to, this is another deduction you can take to benefit from on your taxes. Employers who contribute to employee retirement plans also have some tax deduction benefits associated with starting and owning a small business.
For overnight or out-of-town trips that are business-related, you can also deduct the expenses you incur. You may deduct small business trip expenses, such as airfare, transportation, meals, entertainment, hotel stays and other expenses you incur while traveling for your business. If you decide to combine your business trip with a personal stay, however, you can only deduct the business expenses of the trip from your taxes.