Income taxes: Common small-business deductions

March 01, 2013 (Press-News.org) Income taxes: Common small-business deductions

Article provided by Law Offices of Connie Yi, PC
Visit us at http://www.connieyilaw.com

If you run a small company, you may have the opportunity to lower your taxes. A careful analysis of your business can help determine the tax status of various expenditures. The goal is to understand what business expenses are deductable.

Solid tax preparation begins at the event of the expense. In other words, it is important to track costs as they occur. You will benefit the most from keeping receipts and records of all expenditures associated with your company. As you prepare your return, you may want to consider whether the most common business deductions are applicable to your industry.

Common business tax deductions

While you should track all expenses thoroughly, some payments are crucial to most businesses. For example, you can fully deduct interest on any loans for the development or creation of your business.

You may also deduct mileage, parking fees and tolls for the business-related use of your vehicle. While you do have the option of a standard mileage rate deduction, keeping track of your actual expenses will often result in a larger deduction. To benefit from an auto expense deduction, keep track of mileage for each trip, noting the starting point, destination and business purpose of the journey.

Another significant benefit can derive from completing business at home. If you have a home office, you may deduct operating expenses from your taxes. To qualify for the deduction, the room must be used exclusively for business. This means that it cannot double as a bedroom or storage room. If you qualify for this tax benefit, you can deduct a portion of expenses related rent, utilities, insurance, maintenance, professional cleaning, depreciation and interest. Also, any dedicated services for your business, such as a work cellphone or internet, are deductible. The key is that the services must be used for business purposes.

Furthermore, you can subtract expenses related to education and training. This benefit applies to the cost of continuing education or certification for the field of business you are in. Therefore, if you take courses that qualify you for a new line of business, this is not deductible.

You may also deduct bad business debts from your taxes. For example, if you declared a transaction as income after billing a client and subsequently did not receive the amount due, you may make a bad debt subtraction for the income that was previously declared.

These are just a few common deductions that can help reduce expenses associated with your company. However, there are other deductable expenditures, including the following:
-Startup or expansion costs
-Equipment, supplies and furniture
-Professional software and publications
-Advertising
-Entertainment and travel expenses
-Client gifts
-Charity
-Professional and legal expenses
-Taxes and Social Security
-Insurance premiums

Managing a business is costly, and these benefits may alleviate the net amount of business expenditures that are required to run your company.

All the same, the rules of deduction are incredibly complex under the tax code. A minor mistake could put you at the hands of the Internal Revenue Service. Therefore, it may help to retain the assistance of a qualified tax attorney. A lawyer can assess the status of your business costs.