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Common Business Tax Deductions
If you are a small business owner, there are several deductions available to you if you know what to watch out for
. To reduce your tax liability and save money with the Internal Revenue Service (IRS) each year, there are some common deductions to keep in mind:Start up deductions: These kinds of deductions are made for expenses generated with the start up of your business. Deductions up to $5,000 for the business start up and up to $5,000 for first year organizational operations can be made. These deductions can be made for expenses after Oct. 22, 2004. If they are made before this date or if they exceed $50,000, you may run into unique rules. Any expense that is not covered may be amortized over a 180-month time period from when you open your business. These expenses may include advertising, market research or employee training among other things.
Education Deductions: read Publication 970 if you want to know how to deduct educational expenses. As a rule, employers can deduct employee educational expenses only if the courses help improve job-related skills or if that course is needed for an employee to continue working for the company. Self-employed business owners can also write off some educational expenses like transportation to and from school.
Vehicle Deductions: this can be tricky so read this carefully and keep records. You can deduct vehicle expenses either by the mile or for gasoline and maintenance expenses. When using your personal vehicle for business purposes, note down where you went and the nature of your trip. If your employees use a business car for personal use, record the value in their W-2 forms or wages. You can also save more by using environmentally friendly vehicles. Hybrids entitle you to up to $3,150 from the government.
Cell Phone Deductions: you can use your cell phone bill as a tax deduction if it's part of your business. Do not, however, use it for personal calls. Maintain good records and the phone bills as proof that the calls made were for business purposes.
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