Understanding what Tax Deductions Small Businesses Can Take
If you are starting up a small business of your own, there are lots of business-related expenses which can be deducted when it comes time for you to file your taxes.
These small breaks can make a big difference when money is tight at the very beginning.
To begin with, you can factor in an expense for a car that you are using for your company. If you use your car for business, or your business owns its own vehicle, you can deduct some of the costs of keeping it on the road.
Mastering the rules of car expense deductions can be tricky, but well worth your while. Make sure that you research it as much as possible, to make sure that everything is within the legal boundaries.
To claim your expenses, you can keep track of and deduct all of your actual business-related expenses.
There is another method as well-you can deduct a certain amount (the standard mileage rate) for each mile driven, plus all tolls and parking fees in conjunction with your company.
Make sure that you research exactly what the rates are. As a rule, if you use a newer car primarily for business, the actual expense method provides a larger deduction at tax time.
If you use the actual expense method, you can also deduct depreciation on the vehicle. To qualify for the standard mileage rate, you must use it the first year you use a car for your business activity.
If your auto is used for both business and for you own personal use as well, only the company portion produces a deduction. That means you must keep track of how often you use the car for work all the way up to the end of the year.
Next, once you are running a little company, expenses such as advertising, utilities, office supplies, and repairs can be deducted. This is only true once you are operational, however.
Before your doors are open, no accounting can be made. In general, you can deduct about then thousand dollars in your first year of work.
If you expect to make a profit immediately, you may be able to work around this rule by delaying paying some bills until after you are working, or by doing a small amount of business just to make everything official.
However, it is very common to suffer losses during the first few years of operation, and you might be better off taking the deduction over five years, so you will have some profits to offset.
This is just something for you to consider.
If someone stiffs your company as it is starting up, the bad debt may or may not be deductible — it depends on the kind of product your business sells. Research the guidelines to know exactly what is appropriate and what is not.
If your business provides services, no deduction is allowed for time you devoted to a client or customer who does not pay, unfortunately. A certain amount of entertaining is allowed as well.
If you pick up the tab for entertaining present or prospective customers, you may deduct fifty percent of the cost if it is directly related to business discussed while together.
Once again, make sure that you see specific guidelines.
Make detailed notes about any kind of entertaining, including the date, names of those involved, and what exactly what discussed at the meeting. You will be able to better deduct anything necessary if you have very detailed records.
When you travel for work, you can write off many expenses, including the cost of a plane trip, the costs of operating your car, taxis, lodging, meals, shipping business materials, cleaning clothes, telephone calls, faxes, and tips.
Once again, make sure that your records are detailed and complete.
If you are combining the trip into a vacation for personal purposes, you need to make sure that you are not writing off your personal expenses. This would be illegal, and the IRS will catch your mistakes.
Last but not least, if you use credit to finance business purchases, the interest and carrying charges are fully tax-deductible. The same is true if you take out a personal loan and use the proceeds for your work.
Go over all of the current guidelines, and make sure that you do everything the legal way. Missing even one loophole could end up causing you to be audited.
Tommy Greene is an experiences accountant and has been writing articles regarding finances and taxes for over 10 years. He recommends the best Accountant Salt Lake City for your tax planning and financial needs.
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Tommy Greene
Tommygreene09@gmail.com
http://www.utahtaxmasters.com
