Tax Deductions for Small Businesses
General Rule:
Any expense spent to earn your income is fair game for tax deductions.
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Record and itemize any costs that helped you sell, deliver, invoice, or collect even $1.00 of revenue.
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Business Deductions
Business auto deductions​​
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NOTE: Requires substantiated proof of business, personal, commuting and total miles used each year.
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You are allowed either Standard mileage or Actual vehicle expenses. Whichever is greater.
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Standard mileage:
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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.
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Actual vehicle expenses:
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Deduct business portion of gasoline, insurance, tags, inspection, plates, repairs, maintenance, and depreciation costs.
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Other business auto deductions:
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Parking and toll road fees
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Business portion of vehicle interest expense.
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Depreciation versus Section 179 deduction:
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Section 179 expense:
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Allows electing for an expense deduction up to $500,000 (as of 2012) for qualified property instead of depreciation.
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Depreciation-an expense deduction is allowed ratable over the statutory life of assets
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Note: We do NOT recommend taking accelerated depreciation for business vehicles due to recapture rules.
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For Home Offices: (You must qualify)
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Telephone expense
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Office in home-
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The first telephone line into your home is not tax deductible. Other business lines are deductible.
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Long distance business calls are deductible.
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Cellular phone usage should allocate portion for personal use.
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Payroll
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Employee versus contract laborer
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Internal Revenue Service has increased auditing
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20 important questions to answer. See IRS Form SS-8.
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​Employee reporting requirements can be found on IRS forms 941, 940 & TEC form C-3, 1099s. Most forms due quarterly, some annually.
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Payroll tax requirements. Less than $50,000 monthly liability, taxes are due the 15th day of following month at local bank.
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S corporations Must Have salary expense for officers.
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Overlooked Deductions
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Business gifts of $75 or less per recipient
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Cleaning and laundering services when traveling
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Depreciation of home computers
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Employee educational expenses
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Passport fee for a business trip
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Self-employment tax (1/2 of tax deductible)
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Trade or business tools with a life of 1 year or less
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Uniform and work clothes not suitable as ordinary apparel
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Expenses indirectly related to job such as refreshments for employees
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Health insurance premiums for the self-employed (100%)
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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: