6 Essential Tax Tips for Your Small Business

A hand writing “tax tips” on a chalkboard.

Vendors working with HOAs can make tax time far more manageable by following a few suggestions.

Key takeaways

  • Vendors should do as much as possible to minimize their tax burdens
  • Proper record-keeping makes the job far easier
  • Numerous deductions might be available for your small business
  • Working with a professional accountant is essential to the process

As a vendor working with HOAs or condo associations, you’ll want to do everything in your power to maximize your income. Of course, it’s crucial to market yourself to decision-makers and develop a reputation as a service provider that community managers can trust, but carefully preparing your taxes also offers some benefits. 

Efficient tax optimization practices prevent you from paying too much to the government every spring and can keep you on the IRS’s good side moving forward. Making your taxes a priority also reduces your workload when your documents come due in the spring.

Tax season can make or break your company, so you’ll want to make it a focus moving forward. Here are some tax tips to keep in mind as you manage your operations and grow your business.

1) Separate personal and business expenses

One of the first things you need to do as a small business owner is separate all of your business expenses from your personal ones. Many vendors overlook this step because they feel it isn’t worth the effort, especially if they don’t have employees. But even if you’re just a one-person operation, day-to-day business expenses can quickly add up – and many of them are deductible from your taxable income, which can save you money on how much you owe. 

Opening a business-specific bank account and obtaining a company credit card can help keep your expenses separate by ensuring you never use personal funds for business purposes (or vice versa). You can also pay yourself a monthly salary from this business account because that influences the income tax you’ll have to pay at the end of the year.

2) Keep thorough records

Logging all of your business expenses also helps when looking for additional items to deduct. Using a mobile app to record all your receipt data, log your mileage, and create expense reports keeps this information in one place and makes sending the data to your accountant easy. 

Failing to log all this information could mean missing out on tax deductions that could put more money in your pocket. Every small business is different, so consider various options before settling on a recording system that works best for you. Or speak with an accountant to learn about your options.

3) Learn about depreciation

Depreciation sounds like a bad thing, but it can actually provide tax benefits to small businesses. The gist is that any equipment you use in your business operations will depreciate over time, and you can deduct certain amounts from your taxes as a result. 

Suppose you run a landscaping business catering to HOAs and buy new equipment before your busy season. In that case, the equipment will immediately begin depreciating upon purchase and continue the process for its entire lifespan, offering tax deductions. Figuring out depreciation can be challenging, so save all your receipts and meet with a tax expert to ensure that you maximize your tax savings. 

4) Look into a qualified business income (QBI) deduction

Many small businesses and sole proprietorships are eligible for a QBI deduction at tax time. These deductions allow some taxpayers to deduct as much as 20% from their qualified business income, saving them significant money on their tax bills.

Your eligibility depends on how your business is structured, as QBI deductions are only for pass-through entities that aren’t taxed directly. The IRS reserves these deductions for individuals making less than $182,100 in 2023, so you’ll need to ensure you meet all requirements before you apply. 

5) Deduct your home office space and vehicle usage

It’s possible to deduct the business use of your personal vehicle using two different methods. First, you can use the standard mileage rate, which allows you to deduct 65.5 cents per business mile driven in 2023. If you drive your personal vehicle to your various HOA job sites, for instance, this mileage can really add up.

Alternatively, you can use the actual expenses method to determine how much it costs to operate your car for business. The number you come up with will include gas, repairs, tires, insurance, registration fees, and depreciation.

You can also deduct your home office space if you use a portion of your house for record-keeping, marketing, and other business duties. Taxes, mortgage interest, rent, utilities, insurance, maintenance, and repairs are deductible expenses but only apply to areas of your home you use exclusively for business purposes.

6) Use an accountant

It’s almost always best for small business owners to use a professional accountant to help with their taxes because an accountant can provide information on claiming business expenses, understanding local tax laws, looking for deductions, and utilizing all the tax credits available. A good accountant can minimize the amount you pay, maximize your refund, and ensure that your taxes are properly filled out and filed, making them well worth the money.

And accountants aren’t just for tax time. Working with one throughout the year will allow you to make adjustments to optimize and reduce your taxes in real-time. You can also make investment decisions near the end of the year to reduce how much you’ll owe. Even if you don’t follow any other tax tips on this list, make sure you find the right accountant to assist with your company’s needs. It really will make a difference to your bottom line.

Making the most of your business

Of course, these tax tips for vendors will only help you reach your goals if you have steady HOA clients seeking your services and providing you with notable income. You’ll need to get noticed by property managers in your local area to become a go-to vendor and maximize your earnings in the first place. 

VendorSmart helps bring vendors and community management professionals together through our vendor management platform. We provide our preferred vendors with access to thousands of community managers and associations, helping them find more leads and land more clients throughout the year. Contact VendorSmart for more information about how our platform can help you take your small business to the next level.