Initiating a tech startup is certainly not the easiest thing in the world. At the very same time, you’re securing an office space, you’re camping out in Microsoft Teams meetings, and sourcing the local furniture stores for retro-looking yet modern pieces of furniture to match your brand new offices.
We mean, who’s got the time to bother about startup tax deductions? You do. Or at least, you should have the time. Because, believe us, tax deductions is about to become your new favorite keyword.
We very well know that there’s no expression scarier to entrepreneurs than tax time. This is particularly true if you’re a novice business owner and you’ve never filed business taxes earlier.
At the same time, tax deductions directly affect how much money you spend on taxes annually. The good thing is, the more you understand tax deductions—the more you’ll be able to write off and pay less.
Tech startups use a lot of money, particularly in their first couple of years of existing. Even so, many startup owners don’t take the time to acknowledge their tax deductions before they start spending money, and that’s how worthy tax write-offs disappear.
If this sounds familiar to you, you’re at the right place because our comprehensive list of all tax deductions for tech startups is just what you need.
All Types Of Business Insurance
You’ve probably invested in some type of business insurance to protect your tech startup. It’s important to know that you can write off the cost of insurance for:
- Commercial property insurance;
- General liability coverage;
- Cyber liability insurance;
- Loss-of-income insurance.
Besides, general liability insurance, for example, is different for each business as several factors severely impact the final price you’ll pay for coverage, including the size of your business and how much coverage you want to purchase.
So, if you’re trying to keep your startup’s expenditures as low as possible, make sure to check the general liability insurance at Next which you can get online in less than 10 minutes and get coverage for a wide range of incidents that might damage your growing business operation.
Promotions And Advertising
Getting your company’s name and product out there can undoubtedly cost a lot, but thankfully the funds you spend on advertising and promotions are entirely deductible.
This includes marketing costs spent on Google ads, for example, money spent for marketing materials like business cards, and even money spent for website collaterals like buying domain names.
Simply put, make sure that your accounting department keeps your receipts for all that advertising and promotion you ordered because you can quickly write it off.
Just because you work in the tech sector doesn’t necessarily mean you sit behind the laptop all day. Sometimes, you need to ditch the office, and when you do, you can write off your business travel expenditures. These business travel expenditures cover things like:
- Going to meetups and networking events.
- Traveling to business meetings with investors, contractors, associates, and workers.
- Everyday errands to the post office, office supply store, and print shop.
There are two different ways to write off your auto expenses. The first one is to write off your costs by tracing your business mileage and practicing the mileage deduction at tax time.
The second way to write off your cars and vehicles is by writing off a portion of your total vehicle payments. These expenses include gas, repairs, car insurance, oil changes, and car washes. The rate you write off depends on how much you utilize your vehicles for business purposes vs. personal ones.
All fees related to your business bank accounts and loans are also deductible. This includes your bank fees, and you can deduct all expenses associated with your month-to-month cooperation, overdrafts, deposits, ATMs, and wired transfers.
It also includes your credit and debit card fees and your yearly and overdue payment expenses, and your loan fees, and all the set-up costs for loans like underwriting and origination fees, along with closing expenditures.
All charitable donations made in cash and in-kind contributions you make to your preferred charity are tax-deductible. However, keep in mind that the organization must be classified as a 501(c)(3) non-profit organization. This means that contributions to your favorite political parties and organizations are not tax-deductible. Bear in mind to always demand a donation receipt for taxes, as you’ll have to incorporate them when you declare your tax deduction.
As most tech startups are commonly relatively brand-new in the business world, there’s still plenty to learn for both owners/executives and employees. Luckily, you can entirely deduct the payments of work-related educational materials and events for you and your workforce.
This includes all books and learning materials like ebooks, hardcopy books, magazine subscriptions, newspaper subscriptions, and audiobooks. Also, it applies to all work-related educational workshops and training programs like online lectures, summits, in-person workshops, conferences, lecture series, and more.
All supplies and equipment you acquire for your startup, including computers, copiers, office supplies, desks, chairs, are also tax-deductible. Subject to the equipment’s actual price, it will either be grasped as an expense and written off in one tax year or taken as an asset and depreciated over several years.
Depreciation is a technique of designating the price of an asset over its lifespan. For instance, if you buy a $2,000 laptop and plan to use it for five years, the device would depreciate $400 per year. You can claim that $400 depreciation expense each year on your taxes.
In the early phases of your business, you’ll probably make massive equipment purchases like computers and networking systems to get things up and running. To get the best advice, speak with your accountant about how to deduct these expenses.
Other Tax Deductions
Other notable tax deduction practices include the business licenses and permits you may need to obtain to operate your startup, commissions that you pay to partners or affiliates to promote your products or services, cost of goods sold, the costs of hosting events and parties for your tech startup, gifts for your employees, customers, or affiliates, research and development prices, and utilities.
In the end, writing off your tech startup’s tax deductions is not as easy as deducting regular business expenses. Even if you might feel like you know enough to navigate the process, it’s always an excellent idea to consult with an experienced accountant or, even better, a tax advisor who specializes in startup taxation. These people might help you overcome any obstacles, so you get your tax deductions right at tax time and save your company some money.