Tax deductions for e-commerce businesses
If you have an e-commerce business, chances are you're not taking advantage of all the tax deductions that the IRS allows you as an entrepreneur. Making the most of these deductions in the upcoming tax season will help to grow your business and increase your chances of success.
*Some deductions may not apply to your business, as all ventures are different. We recommend that you write down those deductions that you think can apply to you and mention them to your trusted tax preparer.
If you have an office in your home, and you run and manage your e-commerce business from this office, you can claim a tax deduction based on the total square footage of this office.
It is important to mention that in order to claim this tax deduction, this area of your home must be used only as an office for your business, and not for personal use. In addition, it must also be the main office of your business and you must carry out most activities related to your business from this location.
Internet and Cell Phone Usage
If you use your cell phone for commercial purposes, you may deduct some of the cost of your bill that is proportional to the use you gave to your device. These uses can be: Conversations with sellers and customers, interviews and customer service, among other tasks.
Similarly, an e-commerce business needs an internet connection in order to operate; therefore, your internet connection bill is tax deductible. In the event that the internet connection is shared with the rest of your home, you will need to calculate the percentage of the cost that is used to manage and run your business.
Chances are that if you have an e-commerce business, you'll need to send products and equipment to your customers when you make a sale. The costs of packing and wrapping products, shipping and mailing costs are tax deductible for your business.
Online Services, Software and Websites
If you use different software and applications to manage your business, these costs will be tax deductible; for example, if you use HootSuite for the management of your social media, or Mailchimp for handling your email and advertising campaigns, as well as payroll and accounting programs, and the plugins you use in Wordpress.
Likewise, you will need an online store to be able to manage an e-commerce efficiently and successfully. The costs of maintaining and making changes and improvements to this website and payments for domain maintenance, among others, will be tax deductible.
Another regular cost is the cost of making or receiving calls through Skype, Google Voice or other software used for these purposes. Keep receipts for the credits you purchase to make these calls as long as they are business-related calls.
Office equipment and supplies
Equipment, materials and supplies for your office are critical to run a business running; for an e-commerce business, it is essential to maintain supplies to pack and wrap products (boxes, duct tape, markers, paper, among others). These costs will be tax deductible.
Car and travel costs
If you use your own car to send packages, meet with customers, or other business activities, you can deduct the vehicle's operating costs. In the event that the use of this car is shared for personal and business activities, you will need to calculate the percentage of usage for your business.
There are two options when taking deductions for your vehicle: you can calculate the total costs of operating your vehicle (gas, maintenance) or use the standard IRS deduction per mile driven.
Any premiums you pay for non-health-related insurance coverage, such as commercial insurance or rental insurance to cover your home office, will be eligible for a tax deduction.
Other deductible costs
There are other additional costs that will be deductible, for example:
- Bank fees or interest payments
- Hiring independent contractors such as developers, photographers, etc.
- Hiring professional services such as accountants, lawyers and tax preparers.
Contact your trusted accountant so he or she can provide you with a more extensive list of the different deductions your business can claim.