6 Business Tax Credits and Deductions You Might Not Know About
- Updated On 07/10/2019
- Author : Ram kumar
- Topic : Business
- Short URL : https://hellboundbloggers.com/?p=66912
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The passage of the Tax Cuts and Jobs Act of 2017 turned the page on more than 30 years of more or less static tax policy. Business leaders like steel executive Todd Leebow cheered the new law, predicting that it would generate jobs and boost take-home pay for workers up and down the income scale. The TCJA, as it’s known, certainly appears to have been a boon for steel companies like Leebow’s, thanks in part to its generous (though temporary) depreciation allowance.
Plenty of other businesses stand to benefit from the TCJA’s provisions, too. Moreover, the TCJA left in place some of the tax code’s most popular business tax credits and deductions — including some that not all business owners know about.
1. Qualified Business Income Deduction
This is a big one: a 20% deduction on “qualified business income” for certain service businesses, a nebulous category that may (but isn’t guaranteed to) include everything from real estate ownership entities to professional services firms. Speak with your tax professional to determine whether your enterprise qualifies.
2. Meals and Entertainment
This isn’t a license to buy a round of drinks for the whole house, mind you. It is an allowance to deduct 50% of the cost of meals and entertainment outings that have a legitimate business purpose — including meals taken on business trips, if you’re forgoing a per-diem calculation.
3. Business Use of Vehicle
This expansive deduction category applies primarily to small-business owners and sole proprietors who use their personal vehicles for business purposes. Precisely what you can deduct depends on your business use rate; for instance, you generally can’t deduct depreciation if your business use rate comes in under 50%. Some expenses are entirely off limits, like commuting mileage.
4. Charitable Contributions
Feeling generous? Rest assured that your business’s charitable contributions may qualify for a federal tax deduction. Entrepreneurs whose relatively modest balance sheets don’t justify itemizing individual tax deductions may use this allowance to get credit for charitable contributions; check with your tax professional to be sure.
5. Business Use of Home
Popularly known as the home office deduction, this is another expansive “business use of” category that’s great for home-based sole proprietors of all stripes, professionals who run client practice out of their homes, and entrepreneurs who manage remote workforces from the comfort of their spare bedrooms. It’s easier to list what you can’t deduct; big-ticket expenses like mortgage or rent certainly qualify.
6. Plug-in Hybrid Vehicle Credit
Popularly known as the “electric car tax credit,” the plug-in electric vehicle credit is a powerful incentive that’s particularly attractive to businesses with high-mileage fleets. The credit rises all the way to $7,500 per vehicle, available in full during the tax year of purchase or depreciated over 20 years. Eligibility is fairly strict; your run-of-the-mill Prius is not going to qualify, but your Tesla certainly will — at least, until sales reach the 200,000-per-model lifetime cap.
Act fast, as your friendly neighborhood auto dealer would say.
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