Tax Deductions for E-commerce Business in Phoenix

Tax deductions bring a breath of relief for any earning individual. But are there any special tax deductions for those running an e-commerce business? This is quite complicated to answer, as there are no such tax deductions to boast of, but sometimes these businesses engage in various types of business expenses which grants them the eligibility for potential tax deductions. If one owns an e-commerce business in Phoenix and is curious to know about all the information regarding the same, the best idea would be to contact a phoenix accountant to know about all the points mentioned below in detail. 

Necessary Costs:

IRS uses the necessary and ordinary rule to speculate whether the e-commerce business is eligible for deduction. Operational expenses of an ecommerce business that would be regarded as ordinary for a similar business are often deductible. But one needs to show valid documents to claim deductions. The IRS will require adequate justification for all the deductions during the audit.

Home Office Tax Deduction:

The home office tax deduction that also offers tax reductions to self-employed individuals are the same in the case of e-commerce business. Suppose one uses 10% of the home space for business purposes. The tax reduction benefit will be calculated on that 10%, including home insurance, repairs done in a year, home mortgage interest, utilities, phone charges, power charges, internet costs, and depreciation. However, one thing should be remembered this only applies during business hours.

Deduction in Shipping Costs:

In the case of small e-commerce businesses, all shipping costs are tax-deductible. Shipping costs are necessary for online stores that ship the products sold to customers. Several businesses are also eligible for the deduction of the cost of P.O. box rental.

Deduction of Website Costs:

One running an e-commerce business will need to invest in websites, including software, SEO tools, web hosting costs, and costs involved in WordPress themes. All these are deductible. 

Storage Deductions:

E-commerce business owners are also eligible for a home storage deduction which runs hand in hand with the home office deduction. But the space to be claimed for the inventory storage deduction should be specially designed for storage and not involve personal usage. 

Final Thoughts:

While these are some of the most common tax deductions, one should consult an accountant who has considerable knowledge and experience in taxation that will help in securing maximum tax savings while at the same time abiding by the federal law of the state.