10 Surprising Ways You Can Save on Business Taxes

Posted on October 2, 2024.

As a startup founder, you're likely always on the lookout for ways to save money and keep your business growing. One area where you can find significant savings is through your taxes. While most entrepreneurs are aware of common deductions, there are some lesser-known strategies that can dramatically reduce your tax burden. Here’s a list of 10 surprising ways you can save on business taxes—be sure to share these tips with fellow founders!

1. Deduct Startup Costs Early

Most founders know they can deduct startup costs, but did you know you can claim up to $5,000 of your initial expenses in the first year? These costs include legal fees, marketing, and even market research.

Tip: Track all your pre-launch expenses, from website development to networking dinners—every dollar counts toward your deduction.

2. Take the Home Office Deduction

Even if your home office is a small nook in your living room, you can still deduct a portion of your rent or mortgage, utilities, and maintenance. Many founders miss out on this deduction because they think they need a dedicated room—but that's not the case.

Tip: Measure your home office space and calculate the percentage of your home’s square footage it occupies for a quick deduction estimate.

3. Leverage Section 179 for Equipment

If you've invested in business equipment—like laptops, printers, or even software—Section 179 allows you to deduct the full cost in the year you purchased it, rather than depreciating it over several years.

Tip: Make major equipment purchases before the end of the year to maximize your tax savings for that tax year.

4. Deduct Your Business-Related Meals

Business meals are 50% deductible if they are directly related to business discussions. Whether it's lunch with a client or a strategy meeting over coffee, these expenses can quickly add up.

Tip: Keep receipts and note the purpose of each meal, making it easier to claim this deduction during tax season.

5. Write Off Business Travel Expenses

Traveling for business? You can deduct airfare, hotel stays, meals, and even taxi or Uber rides. If you attend conferences or meet with clients, these costs are fully deductible.

Tip: Don’t forget to include tips and Wi-Fi charges incurred during your trips—every bit adds up!

6. Claim the R&D Tax Credit

If your startup is involved in creating new products or improving existing ones, the Research & Development (R&D) Tax Credit is a goldmine. You can claim a percentage of your qualifying R&D expenses, which includes wages, materials, and testing.

Tip: Document your development process, from concept to execution, to prove the innovative nature of your project and claim this credit.

7. Deduct Insurance Premiums

Many founders forget they can deduct the cost of business insurance premiums. If you have general liability, property, or professional liability insurance, you’re eligible for a deduction.

Tip: Review your business insurance policies and make sure you’re accounting for the full amount you pay each year.

8. Hire Your Family Members

Did you know that hiring family members—such as your spouse or children—can actually reduce your tax burden? By paying them a reasonable wage, you can shift some of your income to lower tax brackets.

Tip: Keep their salaries reasonable and ensure they perform actual work for the business to meet IRS requirements.

9. Maximize Retirement Contributions

Setting up a retirement plan like a SEP IRA or Solo 401(k) can lower your taxable income while allowing you to save for the future. Contributions to these accounts are tax-deductible and can offer significant savings.

Tip: Contribute as much as possible before the year ends to take full advantage of these deductions.

10. Defer Income and Accelerate Expenses

If you’re near the end of the year and your income is on the high side, consider deferring income to the next year while accelerating expenses to the current year to reduce your tax burden.

Tip: Prepay expenses like rent or inventory, and push any new contracts to January to minimize your taxable income this year.

Wrapping Up

Saving on business taxes doesn’t have to be complicated, especially when you know about these unexpected deductions and strategies. Start tracking your expenses now, make the most of available tax credits, and consult a tax professional to ensure you're taking full advantage of these opportunities. Share this list with fellow founders to help them save on taxes too!