Finance and Accounting

Small businesses’ tax deductions checklist

According to a survey after the pandemic, 12% of small business owners mentioned financial stability as their top priority even as business returns plummeted during the past two years. One of the ways to maximise profits is to reduce your tax liability. Tax deductions or write-offs are expenses that can help your small business reduce tax liability at the end of the financial year. If you are a small business owner, chances are that you are already walking a tightrope trying to balance income, expenses, and re-investment for growth. In this blog, we will explore a tax checklist for small businesses.

Checklist to leverage small business tax deductions


  • Reinvest in building your business:

    Any expenses in marketing and advertising to build the business can save you taxes. This includes website design and development, logo design, social media campaigns, event participation or sponsorship fees, and promotional emails.
  • Record expenses:

    Your operating expenses could include telephone, internet, and electricity bills. If your business is operations intensive, your employees could frequently be travelling within or outside the city for work. Maintain proofs and record them in your accounting system.
  • Bank fees:

    Record all types of bank fees while bookkeeping. This includes quarterly account maintenance, credit card payments, overdrafts, and transaction fees for third-party and merchant payments.
  • Use of carryover losses:

    Many small businesses run at a loss for the first few years before they start bringing in profits. Use this standing loss at the end of the financial year to offset tax liability in the following year. For example, if your business has recorded a loss of $4,300 in the first two years combined and made a profit of $6,800 in the third year, you only need to pay tax over $2,500.
  • Depreciation of assets:

    Any assets, such as office space, furniture, mobile phone, or vehicles, in the company’s name depreciates over time. Use the depreciation amount to reduce your tax liability.
  • Insurance premiums:

    Businesses pay premiums over insurance on their property, vehicles, professional liability assurance, and employee health plans. If the business is not the insurance beneficiary, you can offset the tax liability with the premium amount.
  • Business meals and use of personal vehicles:

    Businesses often take their potential clients for meals or drinks to discuss their services or for a future partnership. If you use the personal vehicle for business purposes, you incur expenses on fuel, toll taxes, repairs, tire replacements, scheduled service, and insurance, registration, and lease payments. You can use these expenses to offset the tax liability.
  • Charitable contributions:

    Company owners use their charitable donations to reduce their tax liability. The donation to a registered organisation and a receipt for proof should help you get a write-off.
  • Software licenses or subscriptions:

    Businesses have a range of software licenses or subscriptions to support their operations. This includes accounting software, CRM, ERP, security system, etc. With most service providers opting for software-as-a-service (SaaS), businesses pay monthly fees that they can use for tax reduction.

While paper-based bookkeeping is a thing of the past, many small businesses continue to do so. Some also use older systems for accounting, followed by manual filing. This exposes the business to errors and over- or under-reporting. Modern cloud-based accounting software is intuitive and secure. It proactively shares information about updates and creates easy-to-understand reports such as balance sheets and profit–loss statements. Your accounting team can also calculate tax liabilities, refunds, and rebates and file taxes using the same platform.

For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like living organisms, will be imperative for business excellence. A comprehensive yet modular suite of services is doing precisely that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.

How can Infosys BPM help?

Businesses at any scale need to invest heavy efforts to deal with taxation. While the finance and accounting operations in any business are a top priority, there can be smarter ways to handle these operations. The finance and accounting outsourcing services offered by Infosys BPM are an aid to finance leaders. The digitally powered environment augments the design, transformation, and operation of finance functions.

Recent Posts