Tax deductions are a great benefit to the average taxpayer, but they can bring even more tax benefits a small a business owner, entrepreneur or independent.
business costs deduction can help reduce taxes so you can put more money toward building your empire.
What counts as a deduction?
According to the IRS, "to be deductible, a business expense must be both ordinary and necessary."
usually just means that the expenditure is common and accepted in your field specific. a necessary expense, on the other hand, is useful or appropriate for your trade or business.
for example, a street vendor could deduct car expenses, but a freelance writer working at home could not (unless the car is used to travel to a work-related meeting).
do not forget to keep track of recipes and related when accounts and why an expense is deductible. keep in mind;. these expenses are usually deductible if the business works to make a profit
personal expenses compared to business expenses
generally, you can not deduct personal living or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between business and personal use. You can deduct the part of the business.
For example, if you borrow money and use 60 percent of it for business and another 40 percent for a family holiday, you can deduct 60 percent interest as a business expense. The remaining 40 percent is self-interest and is not deductible.
Here are 6 small business tax deductions that you can take to potentially reduce your taxable income.
1. Home Office Deduction
Is there a specific area that you use to work at home and you work from home regularly in your home ?
Then you can deduct certain home- related expenses, which may include mortgage interest, insurance, utilities, repairs and depreciation. The home office deduction is available to homeowners and renters.
2. Retirement Plans
contribute to a pension plan is a simple way to enjoy a tax deduction. full-time employees with a pension plan sponsored work freelance on the side can still use a SEP IRA or SIMPLE IRA as well.
3. Travel Expenses
What if you want to go visit your parents and it happens to be a conference in the region?
You can deduct travel expenses to the conference and staying at the hotel while you squeeze in some time to visit with your people.
Just pay attention to what you are deducting. The IRS will not see the cost to get to the house of your parents or take them out for a steak dinner as business expenses.
Take your children with you can not be expensed either.
4. Recruit your children
This is true. You can let your child (or children) to help the company. Your child can earn up to $ 6,300 without having to file taxes.
If your business is taxed as a sole proprietorship or partnership (in which each partner is a parent of the child), you will not owe any social security or insurance taxes -maladie income of your child if he or she is under the age of 18
5. Holiday Parties
You can indeed expense the cost of throwing a party Christmas for your employees.
But beware, there are regulations (such as all employees must be invited). Keep a copy of the invitation list and guest. And do not be too lavish.
6. Entertaining clients or customers
Not receiving tax breaks of Mad Men era more, but take a client to a fancy dinner, concert, sporting event or other entertainment for commercial purposes may be radiation.
You can deduct 50% of the costs, but make sure to keep proof of the guest list, and how the event was related to the business.
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