Business Expenses: What You Can Deduct on Your Taxes
One of the key reasons for starting your own business is that it can provide an effective tax shelter. Many of the expenses that you incur during day to day operations can be deducted directly from your taxable income. Since there are many misconceptions regarding what can and can not be deducted, I thought that I would go over some of the common items that small businesses can write off.
The Tax Code
The tax code is a little bit vague which is why many people get themselves into trouble. A deductible business expense is defined as any expense that is ordinary and necessary for the business and not extravagant. The expense must also be primarily used for business and not for personal reasons. While it is up to you to interpret the above statement, its best to always error on being conservative. For example, if I owned a delivery business, I probably wouldn’t want to try and write off a Ferrari as the company car. For all of your expenses, use common sense and always be able to justify your deductions. Keep good documentation of all of your purchases.
Common Writeoffs for Small Businesses
While there are many items that you can deduct off of your taxes, I thought that I would just go over some of the big ticket items that will save you the most on your taxes. Depending on your business, some of these may not apply. Keep in mind that the list below is just that. Because some of the rules can get quite complicated, you can click on the link of each associated topic to get a more in depth explanation. Also keep in mind that I am not a tax professional and that you should consult your own accountant for the specific rules that may apply to you or the area that you live in.
- Deduct Your Vehicle – While it is possible to deduct your car or other vehicle, there are many rules regarding how to do this so you have to be careful. Click on the link to the left for more details..
- Deduct Your Home office – If you run your business out of your own home, you can deduct a portion of your rent if you lease. If you own your home, you can depreciate a portion of your house to defer your tax payments as well.
- Deduct Equipment and Supplies- This applies to any computer equipment that you might use, furniture, electronics or anything else that is used in your office.
- Deduct Entertainment and Meals – Did you know that you can deduct 50% of your meals and entertainment? As long as your entertainment expenses are directly related to your business and you discuss your business, it is fair game.
- Deduct Travel Expenses – While you are off meeting vendors or business partners, why not turn a business trip into a vacation and deduct this off of your taxes?
Key Points
Now that you know the big ticket items that can be deducted at a very high level, keep in mind that there are many specific rules involving these deductions that I will go over in more depth. As you deduct expenses for your own business, it is important to not go overboard. In case you get audited, make sure you can adequately justify each and every expense that you are writing off.
Did you like this article? There are many more articles like this on entrepreneurship, kids and money and how to open an online business on this website. Read about our journey how we went from earning 0 to 100 thousand dollars in 12 months with our online business. Looking for some laughs? Read about some of our crazy customer stories.
Ready To Get Serious About Starting An Online Business?
If you really want to start your own online business and quit your day job, then you absolutely have to check out my guide on How To Create A Profitable Online Store In 5 Easy Steps.In this guide, I reveal the steps that my wife and I took to earn 100 thousand dollars in the span of just a year. Best of all, it's free!
Do You Want To Make Your Business Legit?
Let's face it, not everyone has an MBA and not everyone is educated in the mechanics of starting a business. Getting past all of the government red tape can be intimidating especially if it's your first time starting a business.My Ultimate Small Business Startup Guide will provide you with step by step instructions on everything you need to do in order to make your business legit.
Receive Free Updates!
The above two guides are just a taste of what MyWifeQuitHerJob.com has to offer. Get motivated! Follow our journey how we went from earning zero to $100,000 in the span of one year with our online store! MyWifeQuitHerJob.com delivers quality articles on building wealth, entrepreneurship and how to start and run a business.
Stumble!
Reddit!
Digg!
Del.icio.us
Facebook
Get Free Updates Via RSS
Get Free Updates Via Email
Follow Me On Twitter
Similar Posts
- Small Business Tax Savings – The Ultimate Small Business Startup Guide Part 4
- How to Deduct Entertainment and Meals on Your Taxes
- How Much The Average American Can Save On Taxes By Having A Business
- How to Deduct Your Vehicle on Your Taxes
- How to Deduct Travel Expenses on Your Taxes
Have you read these?
- Do You Feel Stuck At Your Job Because Of The Economy?
- Product Sourcing: What To Expect When Dealing With Overseas Vendors
- How To Build Wealth By Saving Money Without Sacrificing Your Livelihood
- The Tradeoffs Of Owning Your Own Business Vs Working A Day Job
- 5 Ways to Differentiate Your Online Store From the Competition
[...] make more than the $1500 we could painfully save in a month. If you factor in the fact that you can deduct a lot of expenses off of your taxes, its really a no brainer. Set aside one day out of the week to brainstorm and [...]
[...] of an audit go up for every year that you don’t show a profit. Learn other way on how to save on your tax return SHARETHIS.addEntry({ title:’Share me’, summary:’Sharing is good for the soul.’, }, {button:true} [...]
[...] This is probably the tax change that will have the largest effect on small businesses. Starting in 2008, the IRS has increased the section 179 deduction to 250k. This is huge! Now you can afford to purchase more capital equipment tax free to start up your business. With the economy in its current doldrums, Congress is clearly doing whatever they can to foster business activity and growth. Now is the best time to be starting your own business if you haven’t done so already. If you wish to learn more about tax deductions, please read my articles on how to save on your taxes. [...]