Charles Sims Jr., CMFC, LUTCF

By Charles Sims Jr., Special to The New Tri-State Defender

According to a 2015 survey by the National Small Business Association, one in three small businesses devote more than 80 hours each year — two full work-weeks — to handling federal taxes. Because of the complexity of the tax code, it typically benefits small-business owners to take full advantage of every legal tax break they can find.

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

Investments. Some businesses are still eligible to deduct the full amount of certain capital expenditures (such as machinery, equipment, computers, furniture, and some “heavy” vehicles) in the first year of use rather than depreciating them over time. To be eligible, qualifying property must be used more than 50 percent for business. The maximum IRC Section 179 deduction is $500,000. The deduction phases out when the value of all property placed in service during 2016 exceeds $2.01 million.

Insurance. Premiums for property and liability policies that help protect your business interests are typically 100% deductible. Health insurance premiums may also be fully deductible for sole proprietors who are not eligible for other medical coverage, but the deduction must not exceed the business’s net profit.

Businesses can typically deduct 100 percent of employer contributions toward health coverage for employees, including owners’ spouses who work for a family company. Moreover, some small businesses with fewer than 25 full-time employees may qualify for a tax credit when health coverage is offered through the federal government’s SHOP Marketplace and the employer pays at least 50 percent of employee premiums.

Vehicles. Small businesses can take a deduction for auto expenses based on the number of miles traveled using the standard mileage rate (54 cents per business mile for 2016) plus parking and tolls. An alternative method involves adding up the actual costs, including lease payments or vehicle depreciation, car maintenance, and gas.

In either case, the IRS generally expects taxpayers to keep a log that tracks the date, destination, purpose, and odometer readings for each business trip.

There may be other expenses, such as supplies, business travel, client entertainment, and charitable donations that can be written off. Keeping detailed records throughout the year may help ensure that your tax returns are filed accurately and, if you are audited, that you have the documentation needed to back up your deductions.

(Charles Sims Jr., CMFC, LUTCF, is President/CEO of The Sims Financial Group. Contact him at 901-682-2410 or visit