Top ten tax deductions for franchise owners

While spring brings milder weather, baseball, and, for the lucky, spring break, it also brings tax season. Preparing your return and forking over hard-earned money to Uncle Sam can be stressful. But there’s good news: many money-saving tax benefits are available to franchise owners. Just remember to read the fine print and follow IRS rules. Here are 10 tax deductions you don’t want to overlook, including 2 changes from the 2017 Tax Cuts and Jobs Act (TCJA) that took effect for the 2018 tax year.

1. NEW! 20% deduction

One of the TCJA’s most important changes for small business owners is a new deduction for pass-through businesses, which includes S corporations, partnerships, and sole proprietorships. This new provision, also known as Section 199A, allows a deduction of up to 20% of qualified business income for owners of some types of businesses. Limits apply based on level of income and the type of business.

2. INCREASED! Office supplies, furniture, and equipment

You probably know that you can deduct the business supplies you buy. You can also deduct depreciation expenses related to the purchase of office furniture and equipment. With the 2017 TCJA comes an increase in the cap on these depreciation expenses, from $500,000 to $1 million. The law also increases bonus depreciation, where businesses can immediately deduct a large percentage of the purchase price of eligible assets (such as machinery) rather than writing them off over a period of years. For qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023, you can now immediately deduct 100% of the purchase price (previously 50%).

3. Home office

While a home office must be a space devoted exclusively to your business, a portion of a room may qualify as a home office. Measure your work area and divide by the square footage of your home to determine the portion of your rent, mortgage, and utilities you can deduct, or use the newer, simplified method of claiming a home office deduction.

4. Software and subscriptions

You can fully expense new computer software for your business in the year you purchase it. You can also deduct the full cost of business- and industry-related magazine subscriptions.

5. Travel and meals

Good news: your business travel and hotel costs are 100% deductible, as are most costs associated with life on the road (dry cleaning, rental cars, and tipping the bellhop). An important exception: you can deduct only 50% of your meals while traveling.

At home, your on-the-job meals aren't deductible. But if you bring along a client to talk business, you can write off 50% of your work-related dining costs.

Note that the 2017 TCJA eliminated the deduction for any expenses related to activities considered entertainment, amusement, or recreation. So for example, if a meal is provided during a recreation activity, the food/drink must be purchased separately from the recreation activity, or itemized separately on the bill or receipt.

6. Insurance premiums

Self-employed and paying your own health insurance premiums? You may be able to deduct the amount you pay for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. There are limits, and this topic can get a little complicated, so be sure to read up on the details.

7. Retirement contributions

If you are self-employed and saving for your own retirement with a SEP IRA or Keogh, remember to deduct your contribution on your personal income tax return.

8. Social Security

If you're self-employed or starting a small business, you’ll need to make double the Social Security contributions you would as an employee. That's because, as a self-employed worker, you’ll be paying both the employer and the employee’s share of Social Security. The good news: You can deduct half of the contribution.

9. Telephone charges

Although you can’t deduct the cost of telephone service for the first phone line in your home, you can deduct charges for the business long-distance phone calls you make on that line, as well as the cost of a second line used exclusively for business.

If you use your cellphone for your business, you can claim those calls as a deduction. If 30% of your time on the phone is spent on business, you can deduct 30% of your phone bill.

10. Family help

If you hire your children as employees to do legitimate work in your business, you may be able to deduct their salaries as a business expense. If your child is under 18, you won’t have to withhold or pay any Social Security or Medicare tax on the salary (subject to a few exceptions).


I’m not a lawyer or accountant, so be sure to consult your tax professional on the benefits and deductions that suit your particular situation. Go to IRS.gov for more details on any of the above deductions.