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Tax Deductions for Small Businesses
General Rule:

Any expense spent to earn your income is fair game for tax deductions.

Record and itemize any costs that helped you sell, deliver, invoice, or collect even $1.00 of revenue.

Business Deductions

Business auto deductions​​

  • NOTE: Requires substantiated proof of business, personal, commuting and total miles used each year.

  • You are allowed either Standard mileage or Actual vehicle expenses. Whichever is greater.

    • Standard mileage:

      • Deduct cents per mile for business miles driven. Choose standard mileage in the first year to have option of standard mileage or expenses in future years.

    • Actual vehicle expenses:

      •  Deduct business portion of gasoline, insurance, tags, inspection, plates, repairs, maintenance, and depreciation costs. 

  • Other business auto deductions:

    • Parking and toll road fees

    • Business portion of vehicle interest expense.

  • Depreciation versus Section 179 deduction:

    • Section 179 expense:

      • Allows electing for an expense deduction up to $500,000 (as of 2012) for qualified property instead of depreciation.

      • Depreciation-an expense deduction is allowed ratable over the statutory life of assets

        • Note: We do NOT recommend taking accelerated depreciation for business vehicles due to recapture rules.

For Home Offices: (You must qualify)

  • Telephone expense

    • Office in home-

      • The first telephone line into your home is not tax deductible. Other business lines are deductible.

      • Long distance business calls are deductible.

      • Cellular phone usage should allocate portion for personal use.

  • Payroll

    • Employee versus contract laborer

      • Internal Revenue Service has increased auditing

      • 20 important questions to answer. See IRS Form SS-8.

    • Employee reporting requirements can be found on IRS forms 941, 940 & TEC form C-3, 1099s. Most forms due quarterly, some annually.

    • Payroll tax requirements. Less than $50,000 monthly liability, taxes are due the 15th day of following month at local bank.

    • S corporations Must Have salary expense for officers.

Overlooked Deductions

  • Business gifts of $75 or less per recipient

  • Cleaning and laundering services when traveling

  • Depreciation of home computers

  • Employee educational expenses

  • Passport fee for a business trip

  • Self-employment tax (1/2 of tax deductible)

  • Trade or business tools with a life of 1 year or less

  • Uniform and work clothes not suitable as ordinary apparel

  • Expenses indirectly related to job such as refreshments for employees

  • Health insurance premiums for the self-employed (100%)

  • Retirement contributions that need to be made before filing return.

Do you own a small business? Keep more of what you earned with these helpful tax guidelines and business deductions: 

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Proactive Guidance

Office: (281) 370-6622

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