Running a business involves multiple tasks, such as creating a budget for essential operating costs and planning for optional expenses. Business owners may also strategize with their accountants to determine how to increase profits and maximize their tax deductions.
Tax deductions are items that can be claimed against your business income when you file your taxes. When you’re considering facility upgrades, you should ensure they’re tax-deductible so you don’t incur costs you can’t claim on your taxes. Let’s take a look at some facility upgrades you can claim on your taxes, other costs you can write off, and how to ensure you’re prioritizing tax-deductible costs.
What facility upgrade costs are tax-deductible?
Suppose your business building’s located in an area affected by power outages. You may have a generator at your facility to ensure you can keep operating even when the power goes out. Over time, you may need to replace the fuel pump, alternator, belts, radiator, or engine parts. You can write off the cost of generator parts and accessories and the technician’s fees when you file your taxes.
Suppose power outages affect your business and you’re considering installing a new generator. This is an upgrade instead of a repair. You can’t claim this cost in full the year you install the generator. Instead, this cost must be capitalized. You can write off part of the costs each year following the Internal Revenue Service’s (IRS) depreciation table.
All other repair costs can be deducted in full the year you incur those costs, whether your air conditioner breaks down or you have a plumbing leak. Business owners can also deduct energy conservation costs. Suppose you install solar panels and reduce your heating and air conditioning costs. If you reduce those costs by 50 percent or more, you can claim your energy conservation costs on your taxes.
What other expenses can you write off when filing business taxes?
In addition to repair costs and energy efficiency upgrades, business owners can claim several other expenses. The cost of salaries, local and state taxes, business vehicles, health insurance premiums, and continuing education courses are all valid tax deductions.
You can deduct office supply costs for items such as tax envelopes, tax software, and tax return folders. Tax folders are ideal for tracking business expenses throughout the year. You can opt for foil-stamped folders that have your company name on the outside, or you can apply labels identifying the folders’ contents. You can also buy folders compatible with tax software programs, enabling you to print off a sheet with addresses or other critical information and display that data in folder windows.
Some companies opt to use tax software to help them prepare and file their taxes. Using tax software may be a suitable option if you’re a sole proprietor or run a small business.
How can you confirm you can claim expenses?
The IRS website outlines tax regulations and costs businesses can claim on their taxes. Reading IRS articles can help you identify tax-deductible expenses.
Tax accountants are accounting professionals who prepare and file taxes. Since tax accountants specialize in this accounting field, they’re aware of the latest federal, state, and local tax laws. Your tax accountant will know when legal changes affect the costs you can write off. Since businesses have multiple filing dates throughout the year, working with a tax accountant ensures you’re aware of any legal changes affecting what you can claim. Your accounting costs are also tax write-offs.
Businesses can write off repair costs. Other upgrades, such as building an addition or installing a new generator, must be capitalized and claimed over several years. Businesses can also write off office supplies, such as tax folders and other business expenses.