Tax Deductions Small Businesses in New York Should Know About

Running a small business in New York comes with its own set of expenses, but tax deductions can help ease the financial burden. By leveraging the right deductions and tax credits, small businesses can significantly reduce their taxable income, freeing up funds to reinvest in growth.

Understanding these deductions and working with experienced New York tax services can make all the difference in maximizing tax savings. Here are some key deductions and credits that small business owners in New York should take advantage of.

Key Tax Deductions for Small Businesses in New York

Tax deductions help lower your taxable income by reducing the amount of revenue subject to taxes. Here are some of the most important deductions available for small businesses in New York:

1. Home Office Expenses

If you use a portion of your home exclusively for business purposes, you may be eligible for a home office deduction.

• Deductible expenses include a portion of rent, utilities, insurance, and maintenance costs.
• The IRS allows a simplified deduction of $5 per square foot, up to 300 square feet, totaling a maximum of $1,500.
• Keeping records of the space used and associated costs is essential for claiming this deduction.

2. Vehicle and Travel Expenses

If you use a vehicle for business purposes, you can deduct certain expenses.

• Deductible costs include fuel, maintenance, repairs, insurance, and depreciation.
• The standard mileage rate for 2025 is set at 70 cents per mile for business-related travel.
• Maintain detailed records of mileage and expenses to support your deduction.

3. Employee Wages and Benefits

Compensation paid to employees is fully deductible.

• Salaries, wages, bonuses, retirement contributions, and health insurance premiums qualify.
• Payroll records should be maintained to validate deductions.

4. Depreciation and Section 179

Businesses that purchase expensive assets can deduct costs over time.

• The Section 179 deduction allows businesses to write off the entire cost of eligible assets in the year of purchase.
• Bonus depreciation for 2025 is limited to 60% as part of the IRS phaseout schedule.

5. Interest and Financing Costs

If your business has loans, the interest paid on those loans is deductible.

• Business loan interest, credit card interest, and mortgage interest (if used for business) can be claimed.
• Proposed changes may limit business interest deductions to 10% of EBITDA in future years, so staying updated on tax law changes is crucial.

6. Office Supplies and Utilities

Everyday business expenses can add up, but many are tax-deductible.

• Office supplies, including software, stationery, and equipment, are deductible.
• Utilities such as electricity, internet, and phone services used for business qualify.

7. Business Insurance Premiums

Protecting your business is essential, and the costs are tax-deductible.

• Premiums for general liability, professional liability, and commercial property insurance qualify.
• Workers’ compensation insurance is also deductible.

8. Advertising and Marketing Expenses

Promoting your business can also provide tax benefits.

• Costs related to digital marketing, print ads, billboards, and content marketing qualify.
• Website development and branding expenses are deductible as well.

9. Legal and Professional Fees

If you hire professionals to assist with your business and corporate taxes, their fees are deductible.

• Fees paid to accountants, attorneys, consultants, and business advisors qualify.
• Tax preparation fees for business filings are also eligible.

10. Startup Expenses

New businesses can benefit from deductions on initial costs.

• Up to $5,000 in startup costs can be deducted in the first year.
• Additional costs can be amortized over 180 months.

Tax Credits for Small Businesses in New York

In addition to deductions, small businesses in New York can take advantage of tax credits, which directly reduce the amount of tax owed.

1. Investment Tax Credit

Businesses that invest in qualifying property and equipment may be eligible.

• This credit helps offset state tax liabilities while promoting business investment.

2. Empire State Jobs Retention Program

This program rewards businesses that maintain jobs in New York.

• Qualifying businesses receive tax credits for job retention, supporting local employment.

3. Small Business Health Care Tax Credit

Businesses that provide health insurance to employees may qualify.

• Employers offering health coverage through the Small Business Health Options Program (SHOP) Marketplace may receive a tax credit to help offset costs.

4. Work Opportunity Tax Credit (WOTC)

Hiring employees from certain groups can provide tax benefits.

• New York has proposed $90 million over three years to expand support for businesses hiring workers from historically disadvantaged groups.

5. COVID-19 Capital Costs Tax Credit Program

Businesses impacted by pandemic-related costs can claim relief.

• This program helps small businesses recover from operational expenses related to COVID-19.

6. Commercial Security Tax Credit Program

Businesses investing in security measures may receive tax incentives.

• This program, part of New York’s 2024-2025 budget, aims to assist small businesses in enhancing security.

How to Claim These Deductions and Credits

1. Maintain Proper Documentation

• Keep receipts, invoices, payroll records, and bank statements to validate deductions and credits.
• Utilize accounting software or professional bookkeeping services to stay organized.

2. Understand Filing Requirements

• Ensure compliance with both IRS and New York State Department of Taxation and Finance regulations.
• Tax filing deadlines may vary based on your business structure, so staying informed is crucial.

3. Work with New York Tax Services

• Consulting a tax professional can help identify all available deductions and credits.
• Tax experts ensure compliance while maximizing savings.

Summary

New York small businesses have access to various tax deductions and credits that can significantly lower tax liabilities and improve financial health. By keeping detailed records, understanding the latest tax regulations, and working with New York tax services, business owners can maximize tax savings while ensuring compliance. Staying proactive in tax planning can make a big difference in long-term business success.

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