Owning a business can be rewarding and deeply satisfying in a number of ways – and especially if your business is prospering. The IRS offers several tax breaks that can help Florida business owners make their businesses flourish, but some of these tax breaks can be easily overlooked.

If you own a business in this state, our Daytona Beach business lawyers can help. Listed below are ten of the tax breaks that even experienced business owners sometimes overlook.

#1: THE NEW TWENTY PERCENT DEDUCTION

The Tax Cuts and Jobs Act of 2017 established new tax rates for businesses. The corporate tax rate for the largest companies was dropped from 35 to 21 percent.

Some pass-through businesses – partnerships, sole proprietorships, S corporations, and single-member limited liability companies – will now qualify to receive a deduction of 20 percent of their net income.

business owners

This break is for business owners with an income that “passes through” to their own Form 1040 and other tax forms. In businesses like finance, law, and accounting, an owner’s deduction is reduced if his or her income exceeds particular limits. If you earn too much, you may have no deduction.

#2: THE HOME OFFICE DEDUCTION

Employees who previously wrote off a “home office” no longer have that deduction under the Tax Cuts and Jobs Act, but a deduction for a home office is still offered to taxpayers who use the Schedule C. Sole proprietors who report a profit may take the deduction for a home office.

In order to claim the deduction, a home office must be space that is devoted to your business and nothing else.

The deduction isn’t limited to a full room. Your home office can be part of a room. Measure the work area, divide it by your home’s square footage, and that figure is the part of your residential expenses – rent or mortgage, insurance, and utilities – that you may claim.

There’s a simplified method for claiming a deduction for a home office. You should consider both methods for writing off a home office and use the method that’s best in your own situation.

#3: THE RENT DEDUCTION FOR BUSINESS PROPERTY

The expense of renting business space – whether you are renting office space, a storefront, a factory, or any other type of facility for your business – is fully deductible.

#4: THE OFFICE SUPPLY DEDUCTION

Whether or not you take advantage of the deduction for a home office, you may deduct any office or business supplies that you purchase.

office supplies

The advice that you’ve always heard – about keeping all of your receipts for office supplies – is important, because those purchases help to offset your taxable income.

#5: THE OFFICE EQUIPMENT AND FURNITURE DEDUCTION

Under the Tax Cuts and Jobs Act, a business owner may deduct up to $1 million worth of equipment and office furniture purchases. Previously, owners could only deduct for equipment and office furniture purchases up to $500,000.

Owners may deduct the full purchase price of qualified equipment from their gross income, provided they capped such expenditures at $2.5 million for qualified equipment financed or purchased in 2018. The 2017 spending cap was $2 million.

On some assets, a depreciation deduction of 100 percent is available which covers both new and used equipment. Prior to the Tax Cuts and Jobs Act, this deduction was available exclusively for new equipment. Assets that qualify include:

  • equipment or machines for business use
  • office furniture
  • particular interior improvements to commercial properties
  • pickup trucks, SUVs, and vans that weigh more than three tons

#6: THE ELECTRONICS AND SOFTWARE DEDUCTION

Electronics purchases like software, tablets, laptops, and smartphones may be written off. Devices costing $2,500 or less may be expensed the year they are purchased instead of depreciated over several years. Items costing over $2,500 must be depreciated.

computer for work

New software may be completely expensed the same year it is purchased provided that the software is “off-the-shelf,” not proprietary or custom-designed, and is commercially available to anyone.

#7: DEDUCTIONS FOR TRAVEL AND MEALS

The Tax Cuts and Jobs Act did away with most deductions for “entertainment, amusement or recreation,” but several deductions for meals and travel were retained.

Meals, for example, are deductible up to 50 percent provided that the meal isn’t “lavish or extravagant.” For instance, if you invite a client to a sports event, you can’t deduct the ticket prices, but if the hot dogs, burgers, and beverages are on you, you may deduct half of their cost.

#8: THE DEDUCTION FOR INSURANCE PREMIUMS

If you’re a business owner or self-employed and you pay for your own health insurance, the costs may or may not be deductible. You cannot take the deduction if you qualified for other coverage, such as healthcare coverage offered through a working spouse’s healthcare plan.

It’s a tax break that mostly benefits sole proprietors, and the deduction cannot exceed the net profit of your business. You may be able to include some of the premiums that you pay for healthcare coverage for your spouse and dependents.

#9: THE DEDUCTION FOR SOCIAL SECURITY CONTRIBUTIONS

When you’re self-employed, you pay double to Social Security what you would pay as someone else’s employee. Under federal law, employers pay 50 percent, and employees pay the other half, but if you’re self-employed, you pay both halves.

That amount should total 15.3 percent of your net profits, but you can deduct half of your contribution to Social Security on your Form 1040.

#10: DEDUCTIONS FOR SALARIES, WAGES, AND CONTRACT LABOR

Salaries, wages, commissions, bonuses, and taxable benefits are deductible expenses. Payments to freelancers and independent contractors are also deductible. Payments to a sole proprietor, a partner, or an LLC member aren’t deductible since these owners are not employees.

business paperwork

You must send a Form 1099-MISC to independent contractors who earn $600 or more in the tax year. If you use a payroll service, in most cases the service will send a Form 1099-K to contractors. Still, sending your own 1099-MISC – to protect yourself – is a smart idea.

WHERE CAN FLORIDA BUSINESS OWNERS OBTAIN SOUND LEGAL ADVICE?

Today’s marketplace is global. Business owners are concerned about taxes and a number of other legal matters that directly affect their businesses and the business environment. Having a skilled Florida business attorney on your team is imperative.

Along with financial concerns, business owners today deal with discrimination and injury claims; legal obstacles in the hiring process; and intellectual property protection. The most basic decisions often seem to require a law degree, a business degree, and a great deal of wisdom.

An experienced Daytona Beac business attorney will provide the legal guidance, insights, and if necessary, the representation that a business owner in Florida will – at some point – inevitably need.

With a reliable business lawyer working on your behalf, a business owner in Florida can put effective solutions in place before legal problems emerge. An attorney’s help might be the best investment that you can make for your business and its future.

By: Melody Lankford
After graduating from Davidson College, Melody Lankford earned her J.D. from Florida State University’s College of Law in 2004 and was admitted to the Florida Bar that same year. Ms. Lankford joined Raydon Corporation as in-house counsel in 2004. She worked there until 2012, when she founded the Lankford Law Firm. She is an experienced Daytona Beach small business attorney who offers sound legal counsel and experience-based insights to her business clients.