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Small business tax deductions

When you start off with your business the first thing that comes to your mind is how much tax would I have to pay for my earnings Well we have come with a solution there are many things that are genuine and offer for tax deduction.

As you would already know that the tax code permits you to subtract the cost of carrying out your business from your total income and then the net amount that is left is the amount on which you are supposed to pay a tax. So if you know ho to reduce your net income by increasing your deductible costs then this can reduce your taxable income.

It is simple math the more tax deductions you have the less tax you pay. Besides having saved that money you can also enjoy benefits like having a nice car or a vacation etc. the only thing that you need to be careful about is the rules of the IRS that specify what is tax deductible and what is not. There are some 14 things that you can save on. These are listed below.

Auto expenses – maintaining a car is an expensive deal. Now let us come to terms; if you are using your car for your business purpose then you can tax a tax deduction on it. Now you can claim an auto tax deduction in two ways. You can either keep a count on all the business that you have done by using your car or the other way is that you can take out a few miles that you have driven in addition to the parking and the toll fees. Now if you have bought a new car only for business purpose then according to the rules there should be a larger tax deduction and if you go by the actual expense method then you can also reduce the depreciation on the car. If you are using your vehicle for both business and private use then only the portion that has been used for business purpose counts for tax deduction.

Expenses for running the business – when you are doing business there are many things like advertising, the office supplies, utilities etc. these come under deductible taxes. If you are a new businessman then a capital expense of $5,000 is deducted from your tax. And if there is anything that is remaining it is deducted over the next 15 years. If you are look forward to a profit immediately then you can consider this option. You can delay your bills or you can do just little business when you start. But if you do not see any gain then you can go in for the five - year deduction plan.

Expenses on education – if you need any training or any education that is related to your present business then the expenses are deductible. But keep in mind that the expense should be done only when the training improves the skills and techniques that are required to improve the business.

Legal fees – remember that any fees that you pay to the lawyer, tax experts or advisor are deducted in the year that you have incurred them. But supposing that you would need these services in the future also then these are reduced over the time period that you take their services. Any material that you would have bought related to business or tax is deductible.

Bad debts – if you have bad debts then depending on your business type these are deductibles. Suppose that you sell goods then the money that you haven’t received after selling is tax deductible. But if you are a service provider then there is no deduction for bad debts.

Costs for entertainment – any cost that is incurred for entertaining clients or any business meetings is 50% deductible if the event is directly related to the business or is associated to the business like pre business meetings etc. you should keep all the bills intact (catering, restaurants, halls that were booked etc.). Maintain a separate diary with details of the meetings where a cost has been incurred.

Traveling – if you have traveled in regard to business then most of the costs come under deductible costs like air fare, accommodation, taxi, car, meals, phone, cleaning shipping etc. besides whatever is combined with the business is a different issue. If the trip is business related then the expenses are tax deductible.

New Equipment – there are some businesses that can deduct the whole cost of some of the assets in the same year as these assets are bought rather than capitalizing them for a number of years.

Interest – if you are using a credit to take care of your business expenses then the interest and the carrying charges are tax deductible. In case where you have taken a personal loan and used it for your business then also this tax deduction applies. The only thing that you have to be careful is that you have to show that the money was actually used in the business.

Expenses incurred on shifting – if you have to shift as a result of your business then there are some costs that can be deductible. To be eligible for this tax deduction you will have to prove that you moved as a result of the business and the new place should be 50 miles away from your old residence.

Software – if you have bought any software apart from the ones that had come with the hardware then you can apply for a tax deduction. But it must be depreciated over a 3 – year period.

Charity – if you run your business in partnership or if your company is a limited liability company or it has been chosen to be taxed like a partnership company then you can make a charitable contribution to pass the deduction criteria.

Taxes – depending on the type of tax that your business is charged with it can be declared as deductible.

Advertising – any cost that is incurred for advertising you company or product it can pass the tax deduction criteria.

Bear in mind that anything you state as tax deductible should be carefully sought and all the documents should be clear.