Possible Tax Deductions for Small Business Owners

Posted by Bruce Mc on Apr 18, 2011 in Home office, Information, Opinions, Tax Planning | 0 comments

Today, April 18^th is the dreaded “D” Day: Taxes are due. If you are a small business owner and have waited until the last minute to take care of your taxes make sure to consider the deductions listed below. If you’ve already filed, then you can always take them into account come next year’s filing season.

You have a “Home-Business”

If you run your business is ran through your home, you can acquire a huge tax deduction.  There are two different ways that the IRS says you can qualify: 1) regular and exclusive use and 2) principal place of business.

“Regular and exclusive use” simply means that you use a spare bedroom or den in your home only to conduct business. For instance perhaps you run an online business through your bedroom or perhaps you’re a lawyer and file legal briefs etc. within one designated area on a regular basis (this is the key word, regular basis). This is not to be confused with simply having a “home office” where it serves as more of just a convenience. To learn more and how to differentiate the two, click here.

“Principal place of business,” on the other hand, means that while you may have other offices, the head office or headquarters is located within your home. Generally proof that administrative and bookkeeping tasks are completed within the home is needed to claim this deduction.  To learn more, click here.

You Wine and Dine Your Clients

The IRS also allows small business owners to claim up to 50 percent deductions if you have proof that your meal and entertainment expenses/ transactions are business-related.  This means that you have to partake in some sort of business endeavor/discussion either before the meal/event or at least after. However, you must have your receipts in order to claim this deduction (no exceptions). So if you did not save your receipts last year, start to do so now. Additional note: do not try to get deductions from un-related business meals/events. The IRS frequently audits those who claim this deduction since it is the one that is abused the most.

Business –Related Travel

If you use your personal vehicle for business-related purposes, for instance you use your car to meet up clients, customer or vendors or even to attend a local business meeting, the IRS allows you to deduct the mileage. It’s important that you keep accurate accounts and mileage records however, since this is an auditing-prone deduction as well.  To learn the standard mileage rates, click here.

If you go on a “business trip”, you can also qualify for a deduction. But like all of the other deductions the trip has to directly correlate with your line of work and you must save all of your receipts in order to receive a 100 percent deductible on your business-travel expenses.

With that said, here are some additional deductibles you can consider as well: Cost of goods sold; charitable donations; and software, advertising and education expenses.

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This guest contribution was submitted by Jamie Davis, who specializes in writing about masters degree. Questions and comments can be sent to: [email protected].

© 2011, Bruce Mc. All rights reserved.