How tax savvy of a businessperson are you? There are plenty of tax deductions out there just waiting to be found. The problem is that many people simply overlook standard deductions. When you're totaling up your business's expenses, don't overlook these common business deductions. Below are some areas to consider when looking for deductions. Review these carefully and make sure you are within the IRS guidelines. Then, you should review them with your accountant.
Equipment. According to Sec. 179 of the tax code, small businesses can deduct for computers, phones, furniture, and other equipment that is put into service before the end of the year--a limit that will rise to $112,000 in 2007.
Vehicle.The tax rules for claiming deductions with respect to cars, trucks and vans used for business can be confusing. Different limitations apply to vehicles that are owned versus those that are leased. The rules are further complicated depending on vehicle ownership--whether the car is owned by the business or the business owner.
Opening Up Shop.Once you're running a business, expenses such as advertising, utilities, office supplies and repairs can be deducted as business expenses.
Education. You can deduct education expenses if they are related to your current business, trade or occupation, but you must follow strict rules. The expense must be to maintain or improve skills required in your present employment, or be required by your employer or as a legal requirement of your job.
Business Entertaining. If you pick up the tab for entertaining present or prospective customers, you may deduct 50% of the cost if it is directly related to the business, either the business is discussed OR the entertainment is associated with the business meaning the entertainment takes place immediately before or after the business discussion.
Travel. When you travel for business, you can deduct many expenses, including the cost of plane fare, costs of operating your car, taxis, lodging, meals, shipping business materials, dry cleaning, telephone calls, faxes and tips.
Software.Generally, software bought for business use must be depreciated over a 36-month period.
Charity.If your business is a partnership, limited liability company or S corporation (a corporation that has chosen to be taxed like a partnership), your business can make a charitable contribution and pass the deduction through to you, to claim on your individual tax return. If you own a regular (C) corporation, the corporation can deduct the charitable contributions.
Advertising. The cost of ordinary advertising of your goods or services--business cards, yellow page ads, brochures, etc -- is deductible as a current expense.
Moving.If you move because of your business or job, you may be able to deduct certain moving costs that would otherwise be non-deductible personal living expenses.
