Expenses That Represent Savings on Your Business Tax Return

By CPA Cynthia J. Rijo Sánchez, Former President of the Puerto Rico State Society of Certified Public Accountants

Are you claiming all the tax deductions your business qualifies for?

When preparing their income tax returns, many business owners in Puerto Rico ask this question, and it’s understandable because claiming deductions correctly can lead to significant savings to your business.

Deducting expenses from your income tax return isn’t the same as evading taxes. It means strategically using all eligible business expenses within legal limits to pay only what you owe. Deductible expenses are necessary to operate your business and can be subtracted from your income before calculating taxes. The greater these legitimate expenses are, the lower your income tax due becomes.

That’s why it’s essential to have a Certified Public Accountant (CPA) who can advise and help you accurately identify these deductions, so you can plan your finances wisely and stay in compliance with the law.

Let’s look at some of the main business expenses that might be deductible.

• Rent for premises or workspace: The rent you pay for a commercial property, or if you work from home and can prove that you use part of the property exclusively for business purposes.
• Utilities and telecommunications services: The costs for essential services such as electricity, drinking water, phone service, internet, and other essential systems used to operate the business.
• Employee wages and benefits: Your employees’ salaries, health insurance, and retirement plan contributions.
• Advertising and marketing: All costs associated with promoting your business or services, including advertising, social media management, website design, programming and maintenance, and printed promotional materials.
• Materials, inventory, and equipment: Items needed for your business operation, depending on their type and useful life, can be deducted or depreciated.
• Professional services: Fees paid to a CPA, attorney, designer, or consultant for your business.
• Bank interest and fees: Including charges on business loans or your commercial accounts.
• Commercial insurance: Public liability, property, or other coverage related to your employees.

What may not appear deductible

 Many business owners only deduct expenses explicitly listed on their tax returns. However, the law permits other less obvious expenses. For instance, dry cleaning or laundry services. While it might seem like a personal expense, for a television host or a lawyer who needs to maintain a professional appearance, it can be considered deductible. Ultimately, it depends on your industry and how thoroughly you document the connection of such expenses with the generation of your income.

Lessons on depreciation

One concept that business owners sometimes overlook is depreciation expense. Essentially, it’s the acknowledgment that certain assets, such as buildings, machinery, or vehicles, decrease in value over time. Depreciating these assets involves lowering their book value, which can reduce the amount of taxes the business owner owes now.

However, the decision to claim a depreciation expense should be part of a carefully planned strategy because when it’s time to sell that asset, the savings you have now could result in paying more taxes later due to a decrease in the property basis.

Before deciding, ask yourself:

• Will I use this asset for many years as an essential part of my business?; or
• Am I planning to sell it soon?

Answering these questions, with your CPA’s help, will let you take advantage of depreciation without surprises later.

Four tips to maximize your deductions

 Put these additional recommendations into practice:

1. Keep organized accounting records: Document all your income and expenses, even if you’re not required to keep formal books. Keep invoices, receipts, contracts, and any evidence that supports your deductions.
2. Separate your personal and business expenses: Opening a dedicated bank account for your business makes it easier to categorize expenses and prevents mistakes when filing your tax return.
3. Review the business schedules on your tax return: They are designed to help correctly classify your expenses and ensure you don't miss potential deductions. Use them as tools for more efficient and organized financial management.
4. Learn about tax incentives and credits: There are benefits available for specific sectors, such as young entrepreneurs, creative industries, or businesses in rural areas.

Educating yourself on tax matters that legally lower your tax burden is empowering. Learning which business expenses can be deducted, how to document them, and understanding the effects of tools like depreciation are also ways to help your business grow.

 

 

The Puerto Rico State Society of Certified Public Accountants (CPA Society) is a non-profit organization created under Law 75 of 1973, which established mandatory membership in order to practice public accounting on the island. Since then, the Society has brought together all licensed professionals in this discipline, serving as the main forum for their development. Its mission is to serve its members and support their professional excellence, while always safeguarding the public interest. Through its work, it promotes ethics and professional excellence, while also representing those who practice public accounting in Puerto Rico. Learn more about the organization here.

This article is for informational purposes only and does not constitute an endorsement or guarantee of the accuracy or appropriateness of its content for any specific purpose. Popular, Inc. (“Popular”), its subsidiaries, and affiliates do not provide legal, tax, or accounting advice. The information provided should only serve as a general guide and not as a definitive source. This information is current as of September 23, 2025, and does not reflect future changes or updates. Neither CPA Cynthia J. Rijo Sánchez, the Puerto Rico State Society of Certified Public Accountants, nor Popular, Inc., its subsidiaries, affiliates, or related entities, will be liable for any loss or damage (direct or indirect) resulting from the use of this information. All details in this article or related topics should be verified and confirmed with your trusted advisor. If you require advice, please consult a qualified professional of your choice.