Imagine – your e-commerce business had a profitable year, then suddenly you’re hit with an unfathomable amount of taxes. Before this situation becomes your new reality, look at how you can reinvest that money back into your company. If you’re an E-commerce entrepreneur, putting a portion of your profits towards tax-deductible business expenses can offer a tax break and add to your profit margins. From everyday expenses and workspace to business insurance and professional services, there are write-offs you may be missing out on.
Workspace and Travel Business Expenses
Trips to the post office, postage, shipping subscriptions, and delivery charges are all considered tax-deductible as long as you’re not running a dropshipping business. However, the tedious packaging details such as boxes, envelopes, packing materials, tape, markers, labels, and printer ink are also tax-deductible for e-commerce businesses.
If your business is operated from your home, you also qualify for more e-commerce deductions as long as you meet certain requirements. For instance, the majority of your time has to be spent in your home workspace, your work area can only be used for business activities, and it must be the principal place of business. For more details on home office deductions, read what the IRS says about Form 8829 and Schedule C of Form 1040.
Business Insurance and Professional Services
Most small businesses have a business loan or credit card, and lucky for you anything that has interest occurring on it is tax-deductible! Additionally, business, liability, rental, even workers’ compensation insurance are considered tax-deductible. Interestingly enough, even fees that occurred from meetings with professionals that help you manage your business are tax-deductible for e-commerce businesses.
We live in the day and age of social media and online presence. Lucky for your business, advertising on social media, as well as your local newspaper, is tax-deductible. This added bonus of growing your business also includes outsourcing copywriters, designers, and other marketing professionals. If you provide a 1099 form for your employee, you can submit it on your taxes. Marketing tools and services used to manage your social channels and email campaigns are also deemed ordinary and necessary marketing expenses.
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These business expenses are just a fraction of what you can claim on your tax return, depending on the nature of your business. The IRS states a business expense must be both ordinary and necessary to be considered tax-deductible. The IRS states, “An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
Did you know, according to CNBC, the tax overhaul unveiled a new 20 percent tax deduction for small business owners? The qualified business income deduction is one of the new features of the Tax Cuts and Jobs Act, which went into effect last year. If you’re ready to deduct up to 20 percent of your qualified business income or simply want to learn more tax tips for e-commerce businesses, speak with one of our CPAs today. Get started here for a free consultation for first-time clients!