Starting a small business can bring great joy, but the road to profitability can be difficult. Clearly, you need a good business model, a well-thought-out operational plan, enough start-up capital, and a working knowledge of your customers’ needs.

One key to profitability for small businesses is to legally minimize your business taxes. Although the Internal Revenue Service (IRS) allows many legitimate tax breaks for small businesses, some of them can be obscure or unclear, especially when your firm is just starting out.

Here are three small-business tax breaks that many people miss:

Business startup expenses

The federal tax code enables some businesses to take big breaks for the expenses of starting up a business enterprise. Some of these include pre-startup advertising, employee training, consulting fees, and some legal fees. Qualified start-up costs up to $5000 are deductible. You may also deduct $5000 for certain organizational expenditures. These deductions phase-out if your start-up costs exceed $50,000.

Educational expenses for yourself or your employees

The tax code also allows deductions for educational expenses related to the business. Some examples of these are the costs to maintain technical and professional licenses, to obtain new business-related skills, and for educational degrees that are of direct benefit to the business. These deductions can be taken for employees and in some cases by the business owner.

Home-office deductions

If you operate your business or part of it from your home, you may be eligible for a home-office deduction. It is imperative that the room or area of your home that you deduct is used specifically and only for business. You must keep extremely good documentation because at least in the past, a home-office deduction was considered an IRS red-flag issue.

In order to take these and any other business tax breaks, you need to keep scrupulous records. Make sure to keep receipts, invoices, and any other documentation related to these tax breaks. As long as you have the proof, these are legitimate deductions that can significantly improve the profitability of your small business.

If you need a hand uncovering more business deductions and help with tax preparation, we at Abbot Tax are San Diego CPA’s who will get you all the tax breaks your firm is legally entitled to.