The Top 7 E-Commerce Tax Breaks for 2022
Owners of e-commerce enterprises are eligible for special tax deductions. To optimize your tax savings, take advantage of the following e-commerce tax deductions. The time is now to organize your records as tax season is drawing near.
What Does an E-commerce Tax Deductible Means?
Similar to other small business sectors, tax reductions for internet firms provide financial incentives for business owners by reducing their taxable revenue. Tax deductions for e-commerce are unique to the workings and procedures of online firms.
To aid with the start-up expenditures of your e-commerce business, there are seven deductions available. Learn more about each e-commerce tax deduction and how you can save by reading on.
1. Marketing and Advertising
To promote your e-commerce business, you’ll need to engage in marketing and advertising. The fact that some of these costs are tax deductible is a bonus. Printing materials, software, subscriptions (Canva, Hootsuite, etc.), and hiring writers, designers, photographers, and other communications specialists are all included in this.
2. Personnel Charges
You’re in luck if your online store employs people. Benefits and wages for employees are tax deductible. The benefits provided are quite diverse and span anything from health and life insurance to retirement plans and financial aid for education. Even the expenses you incur to make sure your company is insured are deductible. Make sure your employees are properly classified. The IRS penalizes business owners that attempt to categorize personnel as 1099 independent contractors to reduce their tax obligations.
You and your team can both deduct money for professional development opportunities like training sessions. You might be able to write off these costs. Whether they were incurred for a leadership conference or classes to hone your e-commerce abilities like SEO or copywriting. You must provide evidence that the professional development opportunity directly enhances performance.
3. Delivery and Office Products
You might be asking if shipping is tax deductible. Especially if the majority of your business involves sending goods to clients. For your benefit, yes, it is.
Keep a record of the costs associated with shipping for your business, including postage, envelopes, packaging, labels, and other expenses. Paper, ink, boxes, tape, pens, and markers are also allowable deductions.
You may be able to deduct the cost of travel for anything from business errands to product pickups. If you drive your car for these tasks, try to keep track of the expenses and mileage you accrue for business travel and personal travel.
Fuel, maintenance, parking, and even cab tickets may be written off as long as they are incurred in connection with your place of business. For the first half of 2022 and the second half of the year, the IRS reimbursed mileage at a rate of 58.5 cents per mile and 62.5 cents per mile, respectively.
Several utility bills, including those for water, heat, electricity, internet, and phone, are deductible. If you work from home, a percentage of your regular expenses can be deducted as business expenses, much as the workspace deduction. You determine the percentage of your home that you claim as your home office using your water, heat, and electricity bills (relative to the rest of your home). This proportion is then subtracted from your overall utility costs. Whether you operate from home, a place of business, or a warehouse, your phone and internet costs are both tax deductible.
An e-commerce company’s success depends on maintaining a reliable website. The answer is yes if you’re asking if you can deduct web hosting from your taxes. The fees of your domain and web hosting, stock photos, technical administration, optimization tools, and other web-related expenses should all be kept in mind since they may reduce your taxable income.
7. A Work Area
If your home office satisfies the IRS requirements, you may be able to deduct it from your taxes. It must be your primary place of business and be utilized regularly and solely for business activities to qualify. If your space is eligible, you should keep note of its square footage because it will be a crucial statistic to report on your tax return.
You may be qualified for some deductions if you operate from a location other than your home. Such as a coworking space or a warehouse where you store products. Typically, the rent you pay to use a space qualifies as a tax deduction. Maintain records and keep tabs on these expenses throughout the year so that you can deduct the costs of upkeep, repairs, and even enhancements you make to your office. There are additional discounts available for adding energy-efficient machinery or remodeling a space for a medical facility.
Consult a Specialist to Increase Your Deductions
To take full advantage of the e-commerce tax deductions that are available to you, it is best to engage with a Your Part Time Accountant tax specialist because there may be additional deductions based on your circumstances. Call us right now to discuss how we can assist you.