If you are running an e-commerce business, you may be able to lower your tax bill by taking various business deductions allowed by the IRS instead of settling for the standard business deduction. Prior to preparing your tax return for the year, consider the list of available deductions listed below.
Home Office Deduction
If you have at least one room in your home that is used exclusively for running your business, this deduction is available to you. Businesses that qualify for this deduction get to deduct a percentage of most house related expenses, including your mortgage, the light bill, and even maintenance expenses and insurance premiums. (The IRS calculates the percentage allowed to be deducted based on the square footage of your home that is used for your business.)
Office Supplies and Other Equipment
Office equipment used to run your business, such as computers, printers, inventory management software and even paperclips, is usually 100% deductible when used for business purposes.
Telephone and Internet
If you use your telephone and the Internet to conduct business, you can deduct a portion of these expenses based on the percentage of time these services are dedicated to business use.
Travel and Transportation Expenses
If you use a vehicle for business purposes, you have deductions available to you. If you have a vehicle that you use for personal reasons and for business, you can still deduct a percentage of the vehicles expenses based on how often it is used for business purposes. You have two deduction options available: you can take a deduction based on a per mile calculation, or you can deduct the actual cost of expenses like gas and parking. However, you cannot take both.
Other travel related expenses that can be deducted are airplane tickets, meals, and cab fare. You can even deduct tips given to service providers such as waiters and cab drivers.
If your business involves shipping products to customers, you can deduct the costs of your packing materials and postage.
When you use subcontractors to provide services for your business…like web developers, graphic designers, bookkeepers, or anyone else who isn’t on your payroll that is used to provide a service for your business…you can deduct 100% of their fees.
Merchant Account Processing Fees
As an e-commerce business, you most likely use a credit card processing service like PayPal, Stripe, or a merchant account from your own bank to process customer payments. However, did you know the fees associated with these credit card processing services is deductible?
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