Hi, I’m Bette Hochberger, CPA, CGMA.  As a small business owner, understanding tax deductions is crucial for optimizing your financial health. In 2024, several significant deductions can help you minimize your tax burden and keep more money in your pocket. 

Today’s blog explores key deductions tailored to small businesses, empowering you to make informed financial decisions and maximize tax savings. Let’s jump in!

Section 179 Deduction

The Section 179 deduction allows small businesses to deduct the full purchase price of qualifying equipment and property in the year it’s placed in service, rather than depreciating it over time. In 2024, the deduction limit is $1.5 million, offering substantial tax savings for businesses investing in assets like machinery, vehicles, and software.

Qualified Business Income (QBI) Deduction

Introduced as part of the Tax Cuts and Jobs Act, the QBI deduction allows eligible businesses to deduct up to 20% of their qualified business income from pass-through entities, such as sole proprietorships, partnerships, and S corporations. 

Certain limitations and phase-out thresholds apply based on income levels and business types, but leveraging this deduction can result in significant tax savings for eligible small businesses.

Home Office Deduction

With the rise of remote work and entrepreneurship, the home office deduction remains a valuable tax benefit for small business owners operating from home. In 2024, eligible taxpayers can deduct expenses related to the business use of their home, including a portion of mortgage or rent, utilities, and maintenance costs. 

The simplified method allows a deduction of $5 per square foot of the home used for business, up to 300 square feet.

Retirement Plan Contributions

Small business owners can save for retirement while reducing their taxable income by contributing to tax-advantaged retirement plans such as SEP-IRAs, SIMPLE IRAs, or Solo 401(k)s. In 2024, contribution limits for these plans remain generous, allowing business owners to save for the future while enjoying immediate tax benefits. Contributions are tax-deductible and can grow tax-deferred until withdrawal during retirement.

Health Insurance Premiums

Small businesses that provide health insurance coverage for employees may be eligible to deduct premiums paid on behalf of their workers, including owners and their families. In 2024, this deduction remains a valuable tax benefit, helping small businesses offset the costs of providing healthcare benefits while supporting the well-being of their workforce.

Navigating the complex landscape of tax deductions can be scary for small business owners, but understanding and leveraging available deductions can result in substantial tax savings and improved financial stability. As tax laws and regulations evolve, staying informed and seeking professional guidance can ensure that your business takes full advantage of available tax benefits, ultimately contributing to long-term success and growth.

I’ll see you all next time!