All businesses, whether big or small, should pay taxes to the Internal Revenue Service (IRS). But businesses are required to pay more taxes. Fortunately, you could deduct majority of these taxes as your business expenses.
Income, Payroll, and Self-Employment Taxes
Deducting federal income taxes isn’t because these are taxes that you pay on the income of your business. However, you might be able to deduct state income taxes, subject to your state regulations and specific business type. If you employ other people, you could only deduct the business part of your payroll taxes to you. This does not include employee pay that you’ve withheld for FICA tax, including Medicare and Social Security taxes.
As for self-employment taxes, you can’t deduct them. However, as a portion of the estimation for your self-employment taxes, which is the portion solely for you, you could deduct half of it for your adjusted gross income.
Other Business Taxes You Could Deduct
Aside from deductible taxes, Sorenson & Company and other accountants in Salt Lake City list some business expenses you could deduct:
- State business franchise or state income tax.
- State or city gross receipt tax.
- Local, city, or state sales taxes paid for business purchases.
- Depending on your state rules, state disability funds and unemployment insurance contributions.
- State income tax
- Property or real estate tax on any real estate your business owns, including intangible and tangible property taxes.
- Tariff, import, and customs tax.
- Business tax that’s state unincorporated.
- Tax for business vehicle registration.
- License tax for city, business, or other applicable licenses.
- Mobile and telephone taxes.
- Fuel and excise taxes.
- Gas tax, based on the way you claim costs for business mileage — standard mileage vs. actual expenses.
- Taxes for membership dues — exclusively for organizations that are business-related.
- Business travel expense taxes, including entertainment, meals, air travel, hotel, and laundry among others.
- Other business-related miscellaneous taxes.
Some Vital Things to Note
Before deducting your business taxes, it’s crucial to note that you would only be allowed to deduct taxes in the particular year you paid it off for your business. For a business expense to be deductible, it should be business-related. You’re not allowed to deduct personal taxes, like the taxes you paid on your personal property or your home.
You can’t escape business tax, but there are ways you can reduce it. Start from the ways mentioned above.