Key Tax Breaks for Business Owners

The Tax Cuts and Jobs Act has made the tax code more favorable for small businesses. Still, owners will want to take full advantage of every legal tax break they can find.

The following deductible business costs could help reduce your 2018 tax bill. Be sure to consult with your tax professional before you take any specific action.

Home Office Deduction

Business owners who operate out of a qualifying home office have two available claiming options, either of which could result in a larger deduction. Whichever option the taxpayer chooses, the eligibility criteria are the same. To qualify for a deduction, a home office must be used in a trade or business — not to manage personal investments or pursue a hobby. It must also be used regularly and exclusively for business.

Under the original method, eligible taxpayers can write off a percentage of home expenses such as depreciation, rent, property taxes, insurance, utilities, maintenance, and repairs. The percentage is based on the square footage of the office space relative to the total size of the home.

A newer, simplified option allows taxpayers to claim a flat $5 per square foot of the office, up to 300 square feet. Thus, the deductible amount is capped