According to the U.S. Census Bureau, the median household income in America as of 2017 was $61,372. Though this is the highest income on record, expenses have risen sharply in recent years as well, and many families are still just scraping by. This is one of the reasons that buying a business can be an attractive option in today’s economy. 
By owning a business, you can expand your income beyond the small annual raises you would likely receive from an employer. In addition, you can take advantage of tax benefits that could save you quite a bit of money in the long run. And if you happen to run that business from your home, the tax advantages can be more lucrative.
Common Business Tax Deductions: Businesses can take advantage of tax deductions that the average employee can rarely use. These deductions lower your tax burden, so you take home more of your hard-earned money each year. Some of the most common business tax deductions include:
Transportation: When a vehicle is used for business purposes, you can write off a percentage of the miles driven to lower your taxes.
In 2018, the standard tax-deductible IRS mileage rates are as follows:
- 5 cents per mile when the vehicle is used for business purposes
- 14 cents per mile when the vehicle is used for the service of a charitable organization
- 18 cents per mile when the vehicle is used for moving or medical purposes
Business owners may also write off the cost of tolls and parking while using the vehicle for one of the above-listed situations.
Travel: Costs for business-related travel can be written off if you can prove that the purpose of the trip benefits your trade or business. There are special rules that may apply to travel outside of the United States, but generally, businesses can write off:
- Airfare as well as train, bus and car costs to reach your business destination
- Meals and lodging
- Business calls
- Laundry and dry cleaning
- Tips paid for services related to business expenses
- Shipping of materials and/or baggage for business purposes
- The cost of transportation between the airplane, train station or bus station to the hotel, work location, client meetings, conference and/or other business-related destination
Housing (Home-Based Businesses): Those who own home-based businesses can take advantage of the home office deduction. The deduction is available to both homeowners and renters. In order to qualify for this deduction, the home office must be:
- Your principal place of business
- Be used regularly and exclusively for business purposes
According to the IRS, the standard option for this deduction allows you to write off $5 per square foot of home space used for business (maximum of 300 square feet).
Office Equipment: Virtually every business will need to invest in equipment of some kind, even if that means just buying a laptop to take care of the back-end of things. Office equipment, like computers and printers, can be written off as well as office furniture. Part of the costs of office equipment can be written off over a period of time through what is called depreciating assets.
There are six categories of non-real estate assets for businesses. Two of the most common are:
- Five-year property, which includes office equipment, computers and cars
- Seven-year property, which includes office furniture
Depreciation helps lower your tax bill because the higher the depreciation then the lower your taxable income.
Which Business Should You Get Into: There are numerous tax benefits when you own your own business. However, finding a business to get into can be a challenge. You can start your own, but it could take months or even years before you reach profitability. In the meantime, you can expect to put in countless hours every week to get the business off the ground. A better approach may be to purchase an existing business that is already established and making money. With the economy currently growing at a rate of 3% to 4% of GDP, now is a great time to consider this option.
Finding the right business to buy can be challenging, however. Even if a business is already profitable, you need to make sure it is a good fit for your skills and passion. If it is the wrong fit, the business could quickly become a burden. With all the options out there, the best approach is to work with an experienced business broker. A business intermediary can work closely with you and show you choices that match your criteria, so you are well positioned to become successful with your new venture.
