Small Business Deductions
In an earlier article, I talked about how you, as a small business owner, can rightfully claim many small business deductions as a way to reduce your taxes. In this article, I’ll present several more. Check to see if you have included these in your tax planning.
1. Travel Expense Deductions
When flying on business, keep a detailed record of all your expenses. You can claim a deduction on your plane ticket, for example, if your business has not reimbursed you for it. Also, you can write off things like cab fare and mass transit tokens. You can even expense dry-cleaning. But for meals, you are only allowed claim a deduction for half the cost your incur for eating out.
You can even write off expenses you incur for employees and/or business associates that you are traveling with (friends and family members are out). Consult your tax professional for more details.
2. Deductions for Software
If your business uses customized computer software you can claim the expense of that software as long as you spread out the deduction over three years.
But…Section 179 of the IRS rules allow you take the write-off on computer software all in the first year, IF that software is "off-the-shelf," in other words, something like Microsoft Office.
3. Deductions for Charitable Contributions
When discussing this kind of deduction, the rules are a bit complicated. For starters, if your small business is a partnership, or if it is classified as an S corporation, or if you’re organized as a limited liability company, your members will be filing the company’s taxes on your personal forms including donations to charity that you have made. In other words, charitable donations are a "pass-through," as is the case with the company’s income. C corporations are entitled to corporate deductions.
[Note: if you don't know what kind of classification you fall under, consult your tax professional or your attorney.]
OK, then, now that is out of the way, here are the rules:
You, as an individual, can write off 30-50% of your adjusted gross income as long as the organization you are donating to qualifies as a 501(c)(3)charity or foundation.
A corporation can write off up to 10% of their taxable income.
If you donate more than $250 you’ll need to have a letter from that organization that confirms your contribution. Make sure you read IRS Publication 551 as well as the rules set forth in Section 179. Consult your tax professional for more details.
4. Deductions for Advertising
It’s true: you’ll either advertise your company now, or when you have your going out of business sale. Either way, advertising and marketing expenses are deductible if they are directly related to your business. They fall under the "Miscellaneous" category of write-offs. Check out IRS Publication 535 and consult your tax professional for more details.
5. Deductions for Legal and Professional Fees
OK, I saved this one for last because it relates directly to the thing I’ve said many times already: "Consult your tax professional for more details."
Fact is, fees you pay to your attorney and/or accountant are deductible under certain conditions. For example, you can’t write off professional fees you expend when you buy a business asset (e.g., equipment). In that case, you include the charges in the cost of the purchase.
If your business is organized with you as the sole proprietor, you can take a deduction for the costs you incur on tax preparation. You would claim the expense on your Schedule C or C-EZ. Not only that: you would use your Schedule A from your Form 1040. Call your CPA or tax professionals for all the details.
Last but not least:
Uncle Sam wants you to be a success at business. It’s good for the economy when you are. That said, they are more than willing to give you plenty of ways to reduce your tax liability through the use of write-offs and deductions. You have a great opportunity — if you choose to use it.
For More Small Business Tax Help, visit Ara Rubyan’s Your Tax Help Online.
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By Ara Rubyan Small Business Tax Tips |
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