Monday, March 8

How Small Business Owners Can Maximize Deductions For The Lowest Tax Rates

The March 15th deadline is closing in fast, and every small business owner is focusing on finalizing their taxes. As a big part of a merchant’s annual expenditure, any significant reduction in tax remittances can go a long way.

Here are three effective ways to increase your yearly deductions and minimize taxes.


  • New assets


By Section 179 of the tax code, a business has the option to write off all the annual taxes that come with a depreciating asset on the first year, rather than paying bit by bit every year until the end of the asset’s useful life.

For instance, if you run a restaurant business, and you purchase a $5,000 appliance with an estimated useful life of five years, a steady depreciation will be deducting small amounts of the machine’s tax cost every year for five years. Under Section 179, however, you can choose to get full deductions in the first year, and then proceed to pay a constant amount of tax for the remaining years

On the flip side, there’s a limit for the maximum deductions you can make, at $500,000. Moreover, only depreciating assets are eligible for deductions, which means real estate and inventory are out of the picture.

Nevertheless, Section 179 is a great way for small businesses that buy equipment in the first year to enjoy some tax relief, as their establishments gradually stabilize.


  • One-package equipment


Did you know, that buying equipment in one package can significantly increase the total deductions?

Take computers and software, for example. Business software attracts a depreciation period of three years, but computers are depreciated over five years. If you buy a computer that comes with the software installed, you can write off five-year deductions for the entire package in the first year.

Buying software and hardware separately will only get you five-year deductions for the computer and three-year deductions for the software.


  • Business loans


It’s a common misconception that the government treats a loan as taxable income. In reality, however, it’s quite the opposite. The IRS considers the principal and interest you pay as business expenses, meaning you can deduct them from your taxes.

Things get even better when you have a merchant cash advance. Tradespeople in high-risk industries, or with bad credit often rely on advances from individual providers like First American Merchant for funding.

However, what many see only as alternatives to loans can offer pleasant tax relief. How? Well, because you’ll be paying back the advance with individual credit card transactions, a part of every sale you complete will be viewed as a business expense that’s liable for a tax deduction. The more sales you process, the larger your deductions.


Taxes are a mandatory expense that every business, big or small, must incur. Nevertheless, by knowing how you can maximize deductions, you can significantly lessen the burden.


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