Small Business Tax Bene's
Small-business tax rule No. 1: Don't mess with the IRS .
But that doesn't mean you should cheat yourself. Take every legal deduction you can. Here are a dozen that even savvy small-business owners and entrepreneurs sometimes forget.
The deductible dozen :
- Travel, meals, entertainment and gifts
- Insurance premiums
- Retirement contribution
- Social Security
- Telephone charges
- Child labor
- Home office
- Office supplies
- Other equipment
- Software and subscriptions
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Here is more about the top 3:
1. Home office
Concerned that claiming a home-office deduction is tantamount to sending an engraved invitation to an Internal Revenue Service auditor? Don't be, says author of "Minding Her Own Business: The Self-Employed Woman's Guide to Taxes and Record keeping."
"I don't agree that chances of getting audited are greater with a home-office deduction," says the author, a San Francisco Bay-area tax expert, who specializes in serving the self-employed. The key is that you use the term "home office" the same way the IRS does. The tax agency says it must be a space devoted to your business and absolutely nothing else. Deducting the den that houses the family computer and serves as a guest bedroom won't fly with Uncle Sam.
The deduction, however, isn't limited to a full room. Your home office can be part of a room. Just how much of the space is deductible? Measure your work area and divide by the square footage of your home. That percentage is the fraction of your home-related business expenses rent, mortgage, insurance, electricity, etc. that you can claim.
2. Office supplies
Even if you don't take the home-office deduction, you can deduct the business supplies you buy. Hang onto those receipts, because these expenditures will offset your taxable business income.
When your office supplies are more than just pens and paper, you have another tax-cutting opportunity.
Office-furniture acquisitions provide a couple of choices. Deduct 100 percent of the cost in the year of the purchase or deduct a portion of the expense over seven years, also known as depreciation.
If you choose instead to depreciate the desks and filing cabinets, you can't simply split the cost into equal portions over the depreciation period. Instead, you must use an IRS chart to make separate calculations each year.
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Posted in Business Service Post Date 09/16/2015