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As a small business owner in New Jersey, taking full advantage of available tax deductions can significantly reduce your taxable income and help improve your bottom line. Taxes and regulations tend to evolve year by year, especially as minimum wage changes, amongst other things. Understanding the best deductions for your business is more important than ever. Below are key tax-saving strategies and deductions you can use to maximize your savings and keep more money in your business.

 

Key Takeaways

 

• Tracking all business expenses, including meals, office supplies, and home office costs, is essential for maximizing deductions.
• Small businesses can deduct up to $5,000 in start-up and organizational costs in the first year of operation.
• Contributing to retirement plans like solo 401(k)s helps reduce taxable income while securing the business owner’s future.
• The QBI deduction allows pass-through entities to deduct up to 20% of their qualified business income.
• Utilizing state-specific tax credits, such as those offered by New Jersey’s Economic Development Authority, can provide additional savings.

 

Track All Business Expenses

The first step to maximizing deductions is ensuring you track every business-related expense throughout the year. Whether it’s a business lunch, office supplies, or home office expenses, all of these could be deductible. Even small expenses can add up, so it’s crucial to maintain detailed records and keep receipts. Tools like QuickBooks or a professional bookkeeper can help automate the process, ensuring you never miss a deduction.

 

Leverage the Home Office Deduction

If you operate your business from home, you may be eligible to deduct a portion of your home expenses. The IRS offers two methods to calculate this: the simplified method (based on square footage) and the regular method (which allows for a detailed breakdown of actual home expenses like utilities, repairs, and depreciation). To qualify, your home office must be used regularly and exclusively for business purposes.

 

Deduct Start-Up Costs

Starting a new business involves various initial expenses that can be deducted. In 2024, you can deduct up to $5,000 in start-up costs and $5,000 in organizational costs in the first year. These may include market research, legal fees for setting up your business structure, and other necessary costs. If your start-up expenses exceed $50,000, the deduction will be reduced, but these costs can still be amortized over 15 years.

 

Maximize Retirement Contributions

Small business owners can take advantage of several retirement savings plans that offer tax benefits. Contributions to SEP IRAs, SIMPLE IRAs, or solo 401(k) plans are tax-deductible. In 2024, for example, the contribution limit for a solo 401(k) is $66,000 (or $73,500 if you’re over 50), which can dramatically lower your taxable income. Contributing to your retirement plan not only helps secure your future but also reduces your current tax liability.

 

Deduct Business Meals and Entertainment

While the tax code for business meals has changed over the years, meals that are necessary, ordinary, and directly related to your business can still be deductible. In 2024, businesses can deduct 50% of the cost of business meals, provided the meal is not lavish or extravagant and is directly related to your business. It’s also important to remember that meals at conferences or business events can be deductible if they meet the necessary criteria.

 

Take Advantage of the Qualified Business Income (QBI) Deduction

The QBI deduction allows pass-through entities (like S corporations, LLCs, and sole proprietorships) to deduct up to 20% of their qualified business income. This deduction applies to many small businesses but comes with specific eligibility requirements. To qualify, your business must meet certain thresholds based on income, and you may need to assess whether your business qualifies for the full deduction or a partial deduction.

 

Section 179 Deduction and Bonus Depreciation

If your business purchases equipment or property, you can utilize the Section 179 deduction to write off up to $1.16 million in qualifying property in the same year it was purchased (subject to phase-out thresholds). In addition, bonus depreciation allows for the immediate deduction of 100% of the cost of qualifying property in the first year, making it an excellent way to lower your taxable income.

 

Employee and Contractor Benefits

Paying for employee benefits such as health insurance premiums, retirement contributions, and even paid leave can lead to significant deductions. In addition, if you hire independent contractors, their compensation is tax-deductible. For small businesses in New Jersey, hiring employees or contractors who qualify for state-specific tax credits, such as New Jersey’s Grow New Jersey Assistance Program, may also provide savings.

 

State and Local Tax Deductions

New Jersey small business owners can also benefit from state-specific deductions. For example, New Jersey offers a range of tax credits for small businesses that meet specific criteria, such as the New Jersey Economic Development Authority (NJEDA) programs. Additionally, if you incur any losses related to your New Jersey-based business, those losses may be deductible against your federal tax return through the state’s loss carryforward system.

 

Consult a Small Business Accountant for NJ Tax Deductions

Maximizing deductions requires careful attention to detail and thorough understanding of both state and federal tax law. With the constant changes in tax policy, consulting a professional accountant, such as TMD Accounting, is one of the best ways to ensure you’re taking full advantage of the deductions available to your business. They can guide you through the complexities of tax laws, ensuring you don’t miss any opportunities for savings.

 

TMD Accounting is Here to Help You Maximize Deductions

In 2024, small businesses in New Jersey have numerous opportunities to reduce their tax burden by leveraging deductions that apply to both general expenses and industry-specific tax breaks. By staying organized, maintaining accurate records, and taking advantage of the strategies mentioned, you can protect your business from overpaying in taxes and reinvest those savings into growing your company. Don’t let the complexities of tax deductions overwhelm you—work with a trusted accounting partner like TMD Accounting to help navigate your tax strategy and ensure you’re on track for financial success.

 

For more information or assistance with your business’s taxes, contact TMD Accounting at 1-856-228-2205 or fill out our contact form today.