We’ve been impressed with how many people have decided to launch their businesses during the pandemic. Despite the economic challenges, these men and women are ready to pursue their entrepreneurial dreams.
If that’s you this year, then congratulations! Starting a new business is a courageous step. And even though these are uncertain times, we believe you can still thrive as long as you make wise decisions, especially concerning your business finances.
One of the important things you should know about setting up your new business is which expenses are tax deductible. So we’ve compiled a list of deductions that likely apply to you if you’re launching your own company or restaurant this year.
If you have a bookkeeper or CPA, make sure you discuss with them what you can deduct on your tax return. But this list is a great place to start!
Set Up Shop
Money you spend on your office is typically tax deductible. That includes office supplies, equipment, furniture, utilities, rent, and mortgage interest.
If you’re hiring employees already, their wages and benefits count as deductions as well.
Restaurant and café owners: This includes you! The items and décor you purchase for your locale, along with any cooking/baking appliances and coffee machines, are tax deductible. Yes, that includes tables, chairs, napkin holders—all of it.
What if I work from home? You can deduct a portion of your mortgage and utility bills if you have a home office. To clarify, your home office has to be a specific spot in your home that is used exclusively for your business. Your dining room table, for example, wouldn’t count as a home office to the IRS, but a separate study would—or even a computer-and-desk setup in the corner of a room.
Advertise Your Business
You can deduct money you spent on advertising. That can be anything from paying for print or digital ads, advertorials in magazines, social media ads, Google ads, etc.
But it also goes beyond traditional advertisements and covers items such as your website (platform, hosting, website templates, and domain name), email marketing tools, signage, and social media campaigns.
And don’t forget sponsorships! Sponsoring a local event can go a long way in putting your brand in front of your ideal client and building stronger relationships with your community.
Plenty of businesses decided to start delivering during the pandemic. They had to—for many companies, it was either go mobile or go out of business. No wonder the usage of food delivery apps more than doubled!
Chances are, customers aren’t going to go back to the way things were, at least not completely. Now that so many businesses have incorporated delivery, customers are likely to keep using the service.
But don’t worry—your driving expenses for deliveries are tax deductible, and so are trips you take to pick up supplies or food. (Just don’t write off your daily commute to the office or restaurant. Those are personal expenses.)
If you’re doing your own deliveries, then you have three options: buy a car, lease a car, or use your personal car.
Your Personal Car: We recommend keeping a log of your miles when using your personal vehicle for business deliveries. After all, you can deduct only your driving expenses for those business trips, nothing more.
Leasing a Car: You get to save a little more money when you opt out of using your personal vehicle. When you go the leasing route, you can deduct the cost of the lease as well as the interest.
Buy a Car: Again, you can deduct more money when you buy a car than when you use your own. But buying is a little trickier than leasing. Since this is a large purchase, you need to depreciate the vehicle as opposed to deducting the entire cost. Be sure to talk to your CPA about how to do this. Just note, though, that in order to depreciate the car, you need to use it at least 50% of the time for business.
Have questions about these business deductions? Set up a free consultation with one of our bookkeepers. We love helping you save money!