Main Tax Deductions for Sml Business Owner



Taxes are one of the most important issues facing the small business owner. While meeting all responsibilities regarding payment of taxes to the Inland Revenue, small business owners should also use every legitimate opportunity to minimize their tax obligation.

Some of the deductions that are allowable to the business owner include:

  1. Motor Vehicle Expenses.
    Providing the expenses are incurred in producing gross income, they can be deducted. There are rules around a self-employed person so be sure to check these out if you are self-employed before trying to claim them as a deduction.

  2. Using your Home.
    If you are running your business from home you are able to claim a portion of total outgoings as a tax deduction. The calculation for this is based on the ratio: Area used for income earning activities / total area of the home. This will give a percentage which can be used to calculate how much of outgoings are tax deductible.

  3. New Business Expense.
    Some costs which are incurred when you are starting your new business are tax deductible. These costs can include legal expenses incurred in chasing bad debts, repairs on equipment used and rates. There are many more that can be claimed so check with the Inland Revenue Department (IRD) or your accountant.

  4. Payments to a Spouse.
    Under certain circumstances (including permission from the IRD) payments to a spouse can be tax deductible. The IRD has to be convinced that the payment is genuine and made at ‘arms length’.

  5. Previous Years Loss.
    If you have suffered businesses losses in previous years, you are able to carry forward that loss and deduct the loss from net income when calculating your taxable income.

  6. Depreciation.
    Depreciation is tax deductible and there are guidelines that must be followed when deducting depreciation from your taxable income. Check with your accountant.


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