Small Business Tax Deductions

Business owner/taxpayers can deduct most of what they spend in the course of conducting their businesses which makes an enormous difference in their final tax bills. The IRC allows business owners and investors to deduct the costs of conducting the business from their gross income. What remains is the net business profit, the amount subject to taxation. The taxpayer/business owner who can legitimately claim the most deductible business expenses will lower his taxable profits. Generally, if something is necessary for the business, it can be deductible. There are, of course, limitations. Home telephone expenses, traffic tickets, and clothing (except required uniforms) that are worn on the job are not deductible expenses.

The type of business entity can make a big difference when a taxpayer sits down to calculate and file a small business tax return. Some expenses may or may not be deductible, depending on the type of business entity. A common example is that of charitable contributions, which can be deducted by a C corporation, but not by other types of business entities.

Home businesses offer other potential for deductions. A taxpayer can deduct the portion of the taxpayer’s home used for a business as long as the taxpayer conducts administrative or management activities of the business there. And whether the home is owned or rented, the taxpayer can also deduct certain related costs such as utilities, insurance, and remodeling expenses.


Inside Small Business Tax Deductions