By now, you have probably already maximized your small business deductions by following some of the tax tips from budgeting-help.com (please see “Tax Savings for Small Business and the Self-Employed”).

However, there are some lesser known and lesser used tax deductions that can yield more (though sometimes not much more) tax savings:

• Retirement: Offering a tax-deferred retirement savings plan of any kind for you and your employees, or at least for yourself if you are self-employed is an easy way lower your taxable income. There are numerous retirement savings plans and options that have the added benefit of lowering your tax rate. See “Your Health and Future Can Lower your Taxes” for more information.

• Inventory: Although costs of operating a retail or inventory-based business have gotten much lower due to on-demand technology and internet-based e-tailing, you may be able to make deductions based on the inventory of your business, but not the inventory itself. Instead, it is based on Cost of Goods Sold (COGS), or the costs associated with selling off the inventory you carry.

If your business involves inventory and you believe you could benefit from this deduction, it may be best to consult with your tax professional to ensure you are calculating COGS correctly.

• Gifts: As a secondary compensation for your generosity, the IRS allows a (small) deduction for gift giving. Although a gift to a client or customer is 100% deductible, you are limited to $25 dollars per person each year. However, you can tack on costs for wrapping and shipping.

• Education: As long as its related to a current business (and not for a future startup) where the skills you or your employee pick up can increase business profitability, tuition, fees, and even textbooks are tax deductible.

• Charitable contributions: If you have a corporate structure in your business, then you can deduct charitable contributions from business tax returns. However, if your business is structured in another way (LLC, sole proprietorship, etc), the owners of the business can claim the charitable contribution made by the business on their personal taxes.

You should always consult a tax professional for more details about the tax deductions and tax savings strategies your small business can use. After all, professional services are also tax deductible; see “Equipment, Expenses, and Professionals for Hire: More Small Business Tax Savings” for more tax-reducing deductions.

Whether you are an owner/operator, or do not have a small or home-based business, you can still  reduce your tax liability. Go to “Reducing Personal Income Taxes” for more information.  

References
Stephen fishman. Top Ten Deductons for Your Business
E. Ralph Stewart. Top 25 Deductions for Businesses
www.nfib.com. Tax-Saving Moves That Will Pay Off Next filling Season