Section 162 of the Internal Revenue Code specifies that you can deduct all ordinary and necessary expenses paid or incurred during the taxable year to carry on trade or business. So, this fundamentally means that you can deduct expenses that you incur to run your business.
- Twenty percent pass-through tax deduction- If you function as a Sole-Proprietorship, Partnership, LLC, S-Corp then you are a pass-through entity, meaning you are qualified for an automatic 20% deduction from your business taxable income. For more details click on the link https://www.irs.gov/newsroom/irs-highlights-tax-reform-changes-that-affect-businesses
- Business Vehicles- If you are using a car for business purposes then you can deduct the entire amount of the car up to certain limits. It must be noted that only the expenses incurred for business purposes can be deducted. To calculate this amount, either deduct the business miles or by capitalize the vehicle as an asset and depreciate the portion of that cost each year.
- Business Travel- You can deduct 100% of expenses concerning business travel, vacation, and lodging. The travel should be done specifically for business purposes.
- Business meals- business meals are 100% deductible for tax years 2021 and 2022. This rule was made for the hospitality industry so that they can recover from the pandemic.
- House-office deduction- this deduction allows you to deduct expenses concerning mortgage interest, property taxes, insurance, utilities, WIFI repairs, and depreciation from taxable income. The key here is to use a part of your home for business purposes.
- Business Interest Expenses- If your business has any debt then you can deduct the interest expense associated with it. It must be noted that the principal payment is not an expense therefore this cannot be deducted. However, you can deduct the entire amount that the bank earns from issuing debt to you.
- Coronavirus Aid, Relief, and Economic Security Act (CARES Act)- This Act came with the concept of the Paycheck Protection Programme (PPP). This act implemented several programmes to address issues relating to the onset of the pandemic. Its an economic stimulus totalling. billion dollars for emergencies. PPP is considered as a forgivable loan till the time the money is being utilized for payroll, rent/mortgage, and utility payments. Any kind of fund which is received by business as a way of PPP is not considered as taxable.
- Economic Injury Disaster Loan (EIDL)- To aid businesses, which were damaged, because of shutdowns and economic slowdown driven by the outbreak of coronavirus, the Small Business Administration extended EIDL. However, the businesses are not excused from paying taxes on loans.
- Employee Retention Tax Credit (ERTC)- This act allows businesses which are damaged during the pandemic to use ERTC for retaining their staff members. To get certified for this, the business has to have been closed wholly or partly by the government or there must be a decrease of more than 50% in the gross receipts for any given quarter when compared with the same quarter in 2019.
- Families First Coronavirus Response Act (FFCRA)- this Act provides employees with sick/family leave in case they got the virus. Businesses that made these expenses are qualified for 100% tax credits.