Tax Deductions for Small Businesses
What Part of My Business Finances Does the IRS Actually Tax?
The part of any business that gets taxed is the net business profit. The net business profit is determined by subtracting the cost of doing business from the total gross income of the business. Since you are not taxed on business expenses, you can use them to deduct from the amount of your taxable profit.
What Business Expenses Can I Use as Tax Deductions?
The IRS allows you to deduct any "ordinary and necessary" expenses you paid to help run your business. This can cover a wide range of items, including but not limited to:
- Salaries - a business can deduct any expenses going toward paying for employees' salaries
- Traveling expenses - as long as the travel is reasonably related to the interests of your business, this can include the cost for renting a car and for gas, as well as staying in a hotel and all meals
- Renting property - any property used for the business, but is not owned by the business or any of the employees can be deducted as a business expense
- Advertising and promotion - any money spent on advertising can be deducted from your business taxes
Generally, the rule of thumb is that the expense must be reasonably related to benefiting your business before it can be used as a deduction for your business taxes. That means you probably should not count any expenses too remote from the operation of your business. The IRS does not allow purely personal expenses to be deducted from your business taxes. Also, keep in mind that it must be a reasonable business expense. Any expense that is unnecessarily large will generally not be allowed as a deduction on your business taxes.
Should I Consult a Tax Attorney when Doing Taxes for my Small Business?
Tax law is an incredibly vast and complex field of law. If you are unsure of how to do your business taxes, or want to be sure you get every benefit you can when you do your business taxes, you will probably want to consult with an experienced tax attorney. Your attorney can help you determine which expenses are legally deductible and help you avoid any trouble with the IRS.
Consult a Lawyer - Present Your Case Now!
Last Modified: 03-13-2012 03:44 PM PDT
Did you find this article informative?
Link to this page