Taxes – whether you are a startup company, looking forward to make your place in the industry or already a veteran in your industry, taxes are something you can never get ahead off. As awful as it feels to pay taxes, it is for the economy and a must for the legality of your business. While you can’t avoid paying your taxes, there are some tax deductions that can help you with your startup venture.
1. Startup costs are deductible to an extent
Be very careful with the records of your startup cost. Why? Because these records can save you up to $5,000.
If total expenditure in setting up your startup was less than $50,000 then you can save up to $5,000. However, this tax deduction is applicable for costs up to $55,000. But as you go towards the $55,000 mark from $50,000, the deduction decreases. But if the total expenditure is more than $55,000, the startup company will not be able to enjoy the tax deduction. (Always speak to your accountant first.)
2. Research & Development Credit
There is a common misconception about the research for development of companies – people think this research is only applicable to the medical and tech industry. This is not true at all.
You would be surprised to know how many industries conduct research for their development. The best part is that the IRS now offers a good amount of tax credits to any startup companies who are developing new strategies, solutions and tactics for their consumers.
And there is a wide range of services and products that could qualify for the R&D credits. This includes physical products, online services, software and many more. Under this new tax law, startup companies who have annual revenue of less than $5 million are eligible to apply for a R&D credit of $250,000 to offset the FICA payroll tax. Startup companies can take this advantage for up to 5 years which will give them the potential $1.25 Million in the tax credit.
3. Bonus Depreciation
Regardless of what industry you belong, you will definitely need some office equipment or machinery initially. If this machinery and equipment are meant to serve your company for a long time, they could initially help you get a good deduction. Startup companies can deduct the expenses for depreciation. Depreciation is the normal decline in the value of the machinery and equipment due to tear and wear over a long period of time. Under the newest tax law, startup companies and small companies can deduct as much as 100% for any personal property that will be used for the business. The only catch is the expected serving time of the equipment or property must be 20 years. Also, it should not be bought from any of the relatives of the business owner.
4. Services & Software subscription fees
Almost all the startup companies use at least 2-4 online services or platforms to run their business smoothly. Bigger veteran companies of the industry could use as many as 30 software platforms for various logistical and administrative support. All the subscription fees for these software and services are deductible and you could take this advantage to save from your tax return.0