Finding profit is the key concern of the average small business owner, but your taxes could hold the key to discovering it just as readily as your goods and services. Finding tax savings is always to be celebrated, and any real estate your business owns, is buying, or is working on could offer much more than you might think.
The big costs
The two biggest recurring costs in property, the property taxes and interest on the mortgage, are deductible. Finding out what you can deduct means keeping on top of your paperwork. From your bank, you should receive a Form 1098 statement of interest and your property tax statements will show what’s still owed and what’s been paid. You can directly deduct the interest on the statement of interest, as well as how much you have paid on your property tax statement.
The home office
If your business operates from home, then you could be making big savings by virtue of that alone. It’s an often-overlooked deduction for small businesses, but it can make a big difference. The catch is that the room you work in has to be dedicated to business and you have to work from it specifically (just another reason to allocate real space for a home office.) If you do, you can deduct some of the household bills, like the heating, electric, and cooling bills. If you only use a portion of a room dedicated to another purpose (like having a desk in the bedroom) you can’t apply for this deduction.
Depreciation and renovation
All real estate depreciates over time. However, the costs of that depreciation can be deducted from your taxes. Depreciation deductions can result in a higher capital gains tax when you pay, but that can be minimized by repairs and renovation. You may be able to save even more by visiting www.BSWLLC.com today and looking at cost segregation. Certain improvements and renovations are short-term, with a much faster rate of depreciation. If you account for that, you can get even bigger deductions off your taxes.
The costs of repairs and renovations can be deducted from your taxes. However, even the costs of independent contractors can be deducted, though they are not technically your employees. You have to make sure that they qualify as contract labor, as shown at www.TheBalanceSMB.com. You can deduct fees for lawn services, electrician work, plumbing, and much more. Just make sure that you get a written and itemized bill or invoice so that you can keep it for your records. All deductions need to be thoroughly recorded in your books.
If you want to maximize your tax savings (without attracting the ire of the IRS), then it might be wise to partner up with an accountant. Not only can they help you file more sensibly in future and come up with a more comprehensive yet safe deduction strategy, but they may also be able to look over your assets and discover potential tax savings you had completely neglected to think about.