One of the great benefits of being a small business owner is that you might be able to deduct many expenses companies that you would not be able to deduce whether you were an employee. These deductions do not just reduce your income tax. When you take tax deductions for business, you also reduce your income subject to self-employment tax.
The reduction of your adjusted gross income can help reduce your tax by other means, too.
For example, a lower adjusted gross income may mean you qualify for credits for training or other benefits.
See deductions small key companies that can help you reduce your tax bill for 2015.
deduction 1. Self- employed health insurance
If you have income from self-employment, and you buy your own health insurance, you may qualify to deduct your premiums as income adjustment.
To be eligible for the deduction of health insurance for self-employed, you must be eligible for health insurance benefits by an employer - yours or your spouse. Coverage can be for you, your spouse and dependents.
The deduction can not be more than your net business income.
2. Internet and other service fees
The monthly fees you pay for Internet service really add. So could your costs to keep your computer running work. You can also pay subscriptions for virus and malware control, professional references, and subscription software.
Take time to look for all Internet subscriptions and other service charges you pay that can give you a deduction.
3. Telephone Service
If you have separate phones for business and personal use, regardless of whether they are landlines or cell phones, you can take full deductions the lines you use for your business.
If you only have a landline for business and personal use, the Internal Revenue Service does not allow you to deduct the cost. However, you can deduct the toll charges related to your business.
If you have a second line or a cellular phone that you use for business and personal calls, you can deduct a percentage of the cost of your phone service. For example, if you use your cell phone 75 percent for business and 25 percent for personal calls, you can deduct 25 percent of the bill for your phone.
You can request a detailed phone bill to help prove the business use of your phone.
4. First year depreciation of business assets (Article 179)
A special provision in the federal tax code allows you to deduct the entire amount that you invest in business assets in the year you buy them, rather than spreading the deduction over a period of years. This Section 179 expense simplifies record keeping and helps you get the tax benefit from your investment sooner.
For 2015, the limit of section 179 stands at $ 500,000 per year (the same as in recent years). During the post-2015 years, the $ 500,000 limit will be indexed to inflation.
5. Continuous depreciation of business assets
If you have purchased business equipment and other business assets in previous years, but not fully charge in the year when you bought them, make sure that you get the deduction for depreciation this year for each asset.
6. professional contributions and subscriptions
contributions and professional subscriptions added, and they are easy to miss a deduction if you pay them automatically each year. Deduct the cost of journals, subscriptions to magazines related to your work and contributions to maintain your professional license, for example.
Unfortunately, you can not deduct contributions to the IRS considers the clubs have more of a social or recreational aspect, such as contributions to business, social, sporting, lunch, sports, airline, and hotel clubs.
7. Cost of goods sold
If you sell products you make or buy your business, the cost of these products can be an important part of your total business expenses. It is important to calculate the deductible amount of your cost of goods sold each year.
You can not usually deduct the cost of the inventory until you sell, even if you are on a cash basis. Instead, you represent your beginning inventory, purchases, other costs which are added to the cost of goods sold and ending inventory. From this information, TaxACT calculates your deductible cost of goods sold on your business statement.
equipment and supplies you use to make products, whether or not they become part of the goods, should be included in cost of goods sold. An expense must be included in the inventory if it is used in the production or extraction of products you sell. For example, the manufacturing work is included in cost of goods sold. The sale and the cost of administrative work are not.
8. Bad debts
If someone owes you a debt that has to run your business, you might be able to take a deduction on your corporate statement.
If you use the accrual method in your business, you can have bad debts when customers buy things on account and then not paying you. If you use the cash method, however, that many small businesses do, you generally can not take a bad debt for doubtful accounts. This is because you do not count the purchase by the customer as income when they made the purchase.
If you make loans as part of your business to suppliers, customers, employees, and so on, you can take a business deduction for bad debts when these loans become unrecoverable.
9. vehicle expenses
If you use your vehicle for business, your vehicle expenses can provide a valid deduction. Whenever you go to the office supply store or another for business, meet with a client, or car to other business activities, keep track of your business miles so you get tax deductions you deserve.
You can usually choose one of two ways to calculate your vehicle expenses. You can take the standard mileage rate is 57.5 cents per mile for 2015, or you can deduct your actual expenses for driving your vehicle for business.
The IRS requires you to keep your business, travel, and personal miles, and business purpose of your miles, regardless of the method you choose. If you want to deduct actual expenses, you must also track expenses for gas, oil, service, interest on a car loan, lease payments, insurance and depreciation
You must follow the actual spending in some cases. for example if you did not use the standard mileage rate for the first year you use your vehicle in business, if you claimed a deduction of section 179 or the special depreciation allowance on the vehicle or if you use five or more cars at the same time.
If you run your business from your home, you can start tracking business mileage when you leave your input on company business. If you have another main place of business; For example, if you use a retail store, you can not expect business mileage from your main business. Your travel home to the store would be commuting expenses that are not deductible.
10. Benefits
Advantages you pay under the qualified benefit programs for employees are a deductible expense. For example, you can deduct your expenses qualified accident and health plans, adoption assistance, cafeteria plans help dependents, educational assistance, and coverage of group term life insurance for your employees.
11. Taxes
Many taxes you pay as part of your business are deductible as business expenses. Some taxes are already included in business expenses you pay. For example, you pay a tax on fuel for the gas you use to drive your car for business, and the tax is included in the price of gas. When you pay sales tax on office supplies or a delivery truck, the sales tax is included in your office expenses, or the cost of the truck.
You pay other taxes separately and can deduct the taxes on your return business. These include the State Tax on gross business income, federal and state payroll taxes, taxes on personal property on the company's assets, property taxes on the company's property and the excise tax you pay to the state.
You can not deduct the federal income tax.
12. Home office deduction
If you have a space in your home that you use as your home office, or for any other commercial purpose, you may be able to make a deduction for a home office. You will have to follow certain rules.
The space you claim that your home office must be devoted to your business and nothing else, in most cases. He did not fill an entire room, though. Say you use half of your den as a home office. You can deduct expenses on the basis of the area that you use exclusively for business
There are two special cases where you do not respect the rule of exclusive use. If you use your home to store inventory or product samples, or if you run a daycare.
When you apply for a home office, you deduct the indirect and direct costs. Direct expenses are those that apply only to your home office, like painting or repair of any office. You claim 100 percent of direct expenditure.
Indirect expenses include a percentage of the amount you pay for electricity, rent, and so on for your entire home. To find the percentage, divide the total area of your home by the number of square feet in your home office.
If find all utility bills and other receipts looks like too much trouble, the IRS has another option you may prefer. From 2013, the IRS allows you to use a simplified home office deduction. You can take a flat $ 5 per square foot deduction for your home office, up to 300 square feet.
13. pension contributions
One advantage of having a small business is the freedom to choose a better retirement plan for your needs. This is especially true if you want a full range of investment options, and the ability to invest more per year than with traditional IRAs or most employees pension.
It pays to compare plans. If you choose a deductible retirement plan, you may be able to cut taxes this year by contributing $ 5,500 to a traditional IRA in 2015 ($ 6,500 if you are 50 years or older). But if you use a SEP IRA as a person self-employed or small business owner, for example, your company can contribute up to 25 percent of your earnings, up to a total maximum contribution of $ 53,000 for 2015. You have until the extended deadline of October 17, 2016 to set up and contribute to a SEP IRA for 2015.
14. half of the self-employment tax
If you are self employed, you pay social Security and Medicare tax on your entire self-employment income. There is no employer to share the cost. To help compensate, the IRS allows you to deduct half of your self-employment tax as a revenue adjustment to your tax return.
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