7 Ways Small-Business Owners Can Save on Taxes in 2022

Taxes are complicated, and for small-business homeowners, freelancers and folks with facet gigs, they’re much more complicated — particularly now, as filers reckon with the tax results of small-business aid applications and rule adjustments.

However these new twists and turns can create some tax-saving alternatives, in response to three tax execs. Listed below are seven issues they are saying entrepreneurs and impartial employees can do to decrease their tax payments and their nervousness this submitting season and within the yr forward.

If your enterprise obtained a mortgage by way of the Paycheck Safety Program, or PPP, and also you certified for forgiveness, the IRS typically doesn’t contemplate the cash a part of your gross revenue. As well as, in your federal tax return, it’s normally OK to deduct the enterprise bills that you just paid with the mortgage cash.

“The IRS has been clear,” says Meredith Tucker, who leads the Entrepreneurial Providers Group at accounting agency Kaufman Rossin in Fort Lauderdale, Florida.

State-level tax guidelines might have a special stance on PPP taxability, nonetheless, so you should definitely seek the advice of with a certified tax professional.

For 2021 and 2022, the enterprise meals deduction is up from 50% to 100% if the meals and drinks are from a restaurant.

“That may embody takeout and supply. It would not need to be eaten on the premises,” says Mark Luscombe, who’s a federal tax analyst for Wolters Kluwer Tax & Accounting.

However ensure you’re getting your enterprise meals from a restaurant. “You may’t get a deli tray from a grocery retailer and have it qualify,” he provides.

In case you’re self-employed, you will get a tax deduction for each mile you drive for enterprise functions. In 2021, the speed was 56 cents per mile, and in 2022, the speed rose to 58.5 cents per mile. Which means a 20-mile journey to fulfill a consumer would possibly rating a deduction of about $12 this tax yr.

However don’t guess right here; the IRS might ask you to substantiate your mileage. “The vital factor, particularly if you do not have an unique car used only for companies, is to maintain a log,” Luscombe says.

There are particular tax breaks for retirement financial savings if you happen to work for your self. Solo 401(ok)s, additionally referred to as one-participant 401(ok)s, are one instance of IRS-blessed retirement accounts designed for self-employed folks. They mimic most of the options of an employer-sponsored 401(ok), together with with the ability to sock cash away pretax.

SEP IRAs are an alternative choice, and you’ve got extra time to contribute — particularly if you happen to get a tax extension, Tucker says.

“You may take the deduction in your 2021 taxes and never really need to fund the retirement account till the prolonged due date of the return, which could possibly be in September, October,” she says.

The house workplace deduction is a well-liked approach to get a tax break on hire, utilities and different house-related bills, however a house workplace can produce different tax breaks, too. In case you commandeered an previous desk, pc or chair in 2021 in your residence workplace and also you haven’t already claimed it as a enterprise expense, you could possibly deduct its present market worth, says Sean DiMercurio, a licensed public accountant at DiMercurio Advisors in Orlando, Florida.

For instance, if you happen to purchased a laptop computer for $3,000 two years in the past and now it’s price $1,250, you could possibly declare a $1,250 deduction if you happen to began utilizing that laptop computer for your enterprise this yr, he says.

“That is one thing that’s typically missed by this group of taxpayers and is totally allowed,” DiMercurio says. Be certain you have got the receipts or proof of the unique buy, he provides.

Self-employed folks already get a Kind 1099-NEC from shoppers who pay them no less than $600 a yr, but when these shoppers are utilizing Venmo, PayPal or comparable fee platform to ship the cash, one other tax type might begin exhibiting up for 2022.

“They’ll get a 1099-NEC from the individual they did impartial contractor work for, after which from the fee processor — if it was paid by bank card or some digital means — they’re additionally going to get a 1099-Ok for a similar transaction,” Luscombe says.

Which means small-business homeowners will have to be additional organized in 2022. “It will be much more paper and checking out — ensuring you are not double-reporting revenue, too,” he says.

“In case you’re consuming, sleeping, ingesting or fascinated with your enterprise, likelihood is what you are doing is tax-deductible,” DiMercurio says. Even a number of cups of espresso could be tax-deductible underneath the proper circumstances, and it may possibly add as much as massive cash in tax financial savings, he says.