small business tax deduction list

Home Based Business Tax Deductions

Running a home based business reaps many wonderful tax deductions that other businesses some times may not claim. Unfortunately to many small business owners end up paying the government taxes every year because they are unaware or several small business deductions that are available.

Most of the time any expenses that are related to your business can be added as a deduction on your taxes. If you do not pay taxes through out the year, deductions can help you from paying a large amount of taxes each year and can also adjust earned income. Try to avoid paying large amounts of taxes or owning any money by keeping track of simple things!

Each business is a bit different so be sure to mention these ideas to your tax advisor or accountant to see if your business can qualify for these deductions.

1- If you join any business or purchase into any franchise, the expenses such as kits, or franchise fees may be claimed as a deductions.

2- Business Supplies. Be sure to save all receipts for any supplies you purchase for your business use. Computer paper, business cards, pens, catalogs, or any items you purchase and use for your business.

3- Advertising- Most advertising can be claimed on your taxes. Keep all receipts for any newspaper ad’s you may run, or any advertising you do online. Advertising is a business expense and in most cases can be written off.

4- Items Given Away- Keep a list of any items you may give away, and the costs of these items. Most freebies may also be written off.

5- Phone bills and internet access- If you have a phone line for business use or have the internet in your home or office for business use, save all receipts for each bill paid. These items are business expenses and may also be written off.

6- An in home office- If you have an office in your home, make sure to let your tax advisor know. Using a room in your home as an office can also be added on taxes.

7- Long distance calls- If you make any long distance calls that are related to your business, make sure you keep all phone bills showing the calls and the amounts charged. If these calls are related to your work, the cost of the calls may also be written off in most cases.

8- Returned Checks and Bank Fees. If you incur and bounced checks from customers and can not collect on them, those amounts may be deducted, along with any fees you were charged from your bank. Be sure to keep the returned check, the letter from your bank and your bank statement to show the fee you were charged.

9- Postage- All postage costs paid by you or shipping fees may be claimed. Keep receipts for all shipping supplies, and postage.

10- Computers- If you purchase a new computer for business use, the cost of the computer may be claimed. You may also claim depreciation for 3 years after the computer was purchased.

About the Author

Dan & Tara work from home full time with their home based candle business. To learn about a unique business visit http://www.funcandlebusiness.com

Business sales tax collected – do you claim this on federal?

I am part of a small business partnership (filing form 1065). Our business collected state sales tax on applicable sales all last year and paid them to the state. Do we list this state sales tax as a deduction on our federal business taxes? Or do we simply not include the sales tax as part of our total sales?

Best to include in gross sales and deduct the sales tax as a tax expense.

Tax Tips & Information : How to Use Legal Fees as a Tax Deduction

business tax deduction list

If you bought equipment for your business last year such as a computer or a printer, you can deduct those items on your business income tax return. Usually that means tackling Form 4562 and entering one of the most complicated areas of tax law, the dreaded world known as depreciation.

For do-it-yourself-ers who abhor the thought of paying someone else to do your income tax return, this article will help you prepare Form 4562 without breaking into a sweat.

Thanks to a tax rule known as Section 179, most small business owners can fully deduct the cost of equipment without going near those complex depreciation laws. But you still have to complete Form 4562, and then you have to transfer the amount of your Section 179 deduction from Form 4562 to your main business income tax form, whether that be Schedule C (sole proprietorship), Form 1065 (partnership), Form 1120 (regular corporation) or Form 1120S (S corporation). Here’s how to do that:

1. Compile a list of all equipment purchased for the business last year. This list should include the purchase date, the cost and a brief description of the item. Generally speaking, personal property such as office equipment, office furniture and tools can be deducted via Section 179 but real property cannot (buildings and building improvements).

2. Add up the cost of all the equipment that qualifies for the Section 179. If you are not sure whether a particular items qualifies, review the Form 4562 instructions or call the IRS for clarification. As long as the total cost of all Section 179 property bought in 2008 is less than $250,000, you can proceed without getting bogged down in the more complicated aspects of Section 179. If you bought more than $250,000, things get more complicated and you’ll need to get more help than this article provides.

3. Go to Form 4562 and report the total cost of all Section 179 property on Line 2. Again, assuming that the Line 2 amount is less than $250,000, you should be able to carry the Line 2 amount down to Line 8 and Line 9.

4. You must list each property item separately on Line 6. There is only space for two items here, so if you have more than two items, attach a separate schedule which reports all the items and simply write the words “see attached list” on Line 6. Column (a) contains the description; Column (b) and (c) are used for the cost and elected cost, which should be the same.

5. Line 11 is called “Business income limitation”, another example of a simple tax rule with subtle complications. Here’s the scoop: generally, you cannot use the Section 179 deduction to create a business loss or increase a business loss. So if the total cost of your Section 179 items is less than your business profit, you can deduct the full cost of all these items. But if you already have a loss before taking the Section 179 deduction, or if taking the Section 179 deduction creates a loss, then you have to be careful here, and you should probably get some help to sort this out.

Put your business profit on Line 11 and the Section 179 deduction on Line 12, and assuming that Line 11 is greater than Line 12, you are done with Form 4562. The only thing left to do is to transfer the Line 12 amount to your main business income tax form, such as Schedule C, Form 1065, Form 1120 or Form 1120, depending on your business entity.

Looking for more small business tax tips? For a free copy of the 25-page Special Report “How to Instantly Double Your Deductions” visit http://www.YouSaveOnTaxes.com

Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.

Is is standard for a tax preparer to charge $400 to get your taxes done?

I had my taxes prepared by H&R block, and next to my refund amount it list $400 for H&R block fees in parenthesis. We used the following forms: 1040, 1040 schedule A (itemized deductions), 1040 schedule C (profit or loss from business), 1040 schedue SE(self employed) and form 8863(hope and lifetime learning credit). I know some places charge by form, but this sounds drastically high to me. Am I wrong?

For a return of that complexity, $400 is not unreasonable. A CPA in private practice may have charged more while an EA or other independent may have charged less. Add a State tax return to the mix, and it’s hardly excessive at all.

The cost of preparing a tax return depends upon the amount of work involved. Schedule C can be a really messy one especially if you walk in with a shoebox full of receipts and no other business records. The same can be said for Schedule A in many cases. I’ve seen tax prep fees into 4 or even 5 figures in extreme cases and not be out of line.

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