What Payroll Expenses Can I Deduct?
When managing your business finances, understanding payroll expense deductions is crucial. These deductions can significantly lower your taxable income. Below are the payroll expenses you can typically deduct:
- Salaries and Wages: Costs incurred from paying employees for their services are fully deductible.
- Bonuses: Any bonuses paid to employees for performance or holiday incentives can also be deducted.
- Payroll Taxes: Employers can deduct their share of Social Security, Medicare, and federal unemployment taxes.
- Employee Benefits: Contributions to retirement plans, health insurance premiums, and other benefits are deductible.
- Overtime Pay: Extra payments made for hours worked beyond the standard schedule are deductible.
- Contract Labor: Payments made to independent contractors for services rendered can be deducted.
It’s essential to maintain accurate records of payroll expenses to ensure compliance with IRS regulations. Consulting with a tax professional can help maximize your deductions.