Small Business Tax Deductions
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Items including your home office, office furniture, office supplies, auto expenses, health insurance premiums, interest paid on business debts, legal and professional fees, business related meals and client entertainment, travel, business property costs, and any wages paid to family members who work for you are generally allowable.
These Small business tax advantages are changed regularly by law, and it is important to check the latest information with a good firm of tax accountants, who will fully explain the available tax deductions for small business.
The information below is intended only as a guide, and in no way replaces the professional advice of a good tax accountant so do don’t forget to check out his or her tax accountant resume for qualifications and experience relevant to your business, because a good tax accountant will give you the latest small business tax deductions 2004, and probably save you many thousands in small business taxes over the years.
Home office taxation allowances
To qualify for a home office deduction, you must use your home office on both an exclusive and regular basis as your principal place of business or as a place of business to meet with clients.If you qualify, you may deduct depreciation allocated to your business use of the area in your home. Your small business tax deduction can include other indirect expenses of operating your home office such utilities and property taxes.
You may also claim this deduction if your home office is the only place for conducting the administrative or management activities of your business or if only minimal administrative work is done outside your home office.
Office Furniture tax allownaces
Office furniture acquisitions provide a couple of choices for small business tax deductions. They can be deducted at one hundred percent of the cost in the year of the purchase or depreciated over seven years.If you choose to depreciate 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.
Office supplies tax deductions
Even if you don't take the home office tax allowances, you are allowed to deduct the business supplies you buy. Hang onto those receipts, because its surprising how these amounts add up over the tax year.Auto expenses
If you use your car in your business, you can deduct it's depreciation and the cost of operating and maintaining it.There are two methods for claiming small business tax deductions related to automobile expenses: You may deduct the business portion of actual expenses you incur, such as the cost of gas, maintenance, insurance, license and registration fees or you can keep track of the business miles you drive and multiply your business miles by a mileage rate. Tolls and parking fees for business journeys also count, so dig out those tickets that've been in the glove box all this time.
Health insurance premiums
Small business owners can now deduct as an adjustment to gross income one hundred percent of health insurance premiums as these costs have sky-rocketed for the business owner.Interest payments
If you use credit to finance business purchases, the interest and carrying charges are fully tax-deductible.This shouldn’t be incentive to get into debt, but can help offset the cost of loans you often need to grow or properly capitalize your business.
The interest on the business use element of your vehicle finance can be deducted, but be sure that you are not double counting the deduction.
Legal and professional fees
Professional service fees are a fact of life for small business and costs can be significant. The fees that you pay lawyers, CPAs, or other consultants such as marketing or IT professionals, can generally be deducted in the year incurred.Business meals and entertainment expenses
When you entertain present or prospective customers, you may deduct fifty percent of the related cost if it is "directly related" to the business, and business is discussed, or "associated with" the business, and the entertainment takes place immediately before or after a business discussion.This small business tax deduction has been abused in the past so take care with your records and note who attended and the purpose of the meeting to back up your claim.
Travel expenses.
When you travel for business, you can deduct the full cost of transportation and lodging as well as fifty percent of meals and entertainment costs. Other expenses incurred while on–the-road qualify such as dry-cleaning, telephone calls, and internet connections.Business Property
For tax years beginning in 2003, 2004 and 2005, small business owners can elect to immediately deduct 100 percent of the cost of qualified business property up to $100,000, instead of depreciating it over several years.Computer Software
Computer software previously had to be depreciated over three years. Since software is often out-of-date in three years you can now deducted its’ cost in the year purchased. It is one less asset that needs to be tracked year-to-year.There are many other deductions not listed here, and remember that your tax accountant will tell you the latest information.
Don’t forget the importance of keeping good records in order to substantiate your expenses and support your small business tax deductions in the event of an IRS audit.
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