Overlooked Business Tax Deductions for 2024

As a business owner, you know how important it is to take advantage of every opportunity to reduce your tax burden. While many are familiar with deductions like office supplies, employee salaries or travel expenses, there are several lesser-known deductions that can significantly impact your bottom line. Identifying and claiming these overlooked deductions could mean keeping more of your hard-earned revenue.

Home Office Deduction

If you operate your business from home, you may qualify for the home office deduction—even if your business also has a physical office location.

• Eligibility: The space must be used exclusively and regularly for business purposes.
  
  
• Simplified Option: Instead of itemizing actual expenses, you can claim a flat $5 per square foot, up to 300 square feet.
  
  
• What’s Included: Utilities, rent or mortgage interest, home insurance and depreciation are all partially deductible based on the percentage of your home used for business.

Startup Costs and Organizational Expenses

New businesses can deduct up to $5,000 in startup costs and $5,000 in organizational expenses in their first year of operation.

• Examples of Eligible Costs: Market research, advertising, legal fees for incorporation and expenses for employee training.
  
  
• Phase-Out: If your total startup costs exceed $50,000, the deduction amount begins to phase out.

Qualified Business Income (QBI) Deduction

The Qualified Business Income (QBI) deduction is available for certain pass-through entities like sole proprietorships, partnerships and S corporations.

• What It Offers: A deduction of up to 20 percent of your qualified business income.
  
  
• Limitations: The deduction phases out for high-income earners and may depend on the type of business you operate.
  
  
• Strategy Tip: Consult a tax professional to confirm that you meet the requirements to maximize this deduction.

Meals and Entertainment

While entertainment expenses are largely no longer deductible, business meals remain partially deductible. Meals with clients, prospects, or employees for business purposes can generally be deducted at 50 percent.

Food provided at office events or during employee meetings is fully deductible. Keep detailed records, including receipts and notes on the business purpose of the meal.

Educational and Training Expenses

Investing in your team’s education is not only good for business, but it can also save you money on taxes.

With training programs, certifications and continuing education courses, you can deduct up to $5,250 per employee annually.

Business Vehicle Expenses

If you use a vehicle for business purposes, you may be able to deduct related costs.

Two Methods to Choose From:

• Standard Mileage Rate: The standard rate in 2024 was 67 cents per mile and will be 70 cents per mile for the 2025 tax year.
  
  
• Actual Expenses: Deduct costs like fuel, maintenance, insurance and depreciation.
  
  
• Recordkeeping Tip: Use apps like MileIQ to track mileage accurately.

Energy Efficiency Incentives

If your business has invested in energy-efficient upgrades, you could qualify for deductions or credits.

• Section 179D Deduction: For installing energy-efficient systems in commercial buildings, such as HVAC or lighting upgrades.

• Energy Investment Tax Credit (ITC): For businesses that install renewable energy systems, such as solar panels.

Bad Debt Write-Offs

If your business extends credit to customers and cannot collect payment, you may be able to deduct the bad debt.

• Eligibility: Applies to accounts receivable for services or products, unpaid loans or employee advances that are not repaid.
  
  
• Limitations: Deduct only the amount already included in your gross income.

Technology and Software Subscriptions

The tools and software that keep your business running smoothly may be deductible.

• Eligible Subscriptions: CRM tools, accounting software, project management platforms and cloud storage services.
  
  
• Pro Tip: Ensure that subscription costs are fully itemized and separated from personal use to maximize deductions.

Health Insurance Premiums for the Self-Employed

If you’re self-employed, you may be able to deduct your health insurance premiums.

• What’s Covered: Premiums for yourself, your spouse, dependents and children under 27.
  
  
• Income Limits: This deduction cannot exceed your net business income for the year.

Retirement Plan Contributions

Contributing to retirement plans for yourself and your employees can yield substantial tax benefits.

• Options Include: SEP IRAs, SIMPLE IRAs and 401(k) plans.
  
  
• Benefit: Contributions reduce taxable income while helping you save for the future.

How to Determine Your Eligibility

Navigating tax deductions and credits can be overwhelming, especially with constant changes to tax laws. To confirm that you’re claiming all eligible deductions:

1. Maintain Organized Records: Keep receipts, invoices and detailed records of all expenses.
   
   
2. Consult a Tax Professional: A qualified business tax preparer can identify deductions specific to your business and ensure compliance with IRS regulations.
   
   
3. Use Tax Software: Tools like QuickBooks or Xero can help track deductible expenses throughout the year.

Maximize Your Tax Savings with the Help of Our Business Tax Preparers in Phoenix, Scottsdale and Tempe

Don’t leave money on the table this tax season. At H&H Accounting Services our team of business tax preparers specializes in helping businesses uncover overlooked deductions and navigate complex tax codes.

From determining your eligibility for credits to optimizing your deductions, we’re here to help you maximize your business deductions.

Contact us today through our website to schedule your consultation or give us a call at (480) 561-5805 and make 2024 your most tax-efficient year yet.