Posted: 02/09/2007--25/11/2008 || Rate this Article: 3 || Views|| Sign In || Register ||Hello Guest
If you think tax breaks are just for the big corporations, youre wrong. Even if youre running a small business out of your home, you may be entitled to a variety of deductions.
Use of Your Home
The place in your home where you operate your business may qualify for certain deductions, but it must be used solely for business purposes, and utilized on a regular basis. In addition, the area must be, at least, one of the following:
* Where you conduct most of your business.
* Where you interact with customers, clients, or patients.
* Not physically connected to, but a part of, your home.
In addition, you may also be able to deduct other work-related expenses, such as your materials, office supplies, advertising, and outsourcing fees. In addition, repair costs and utilities may be deducted if theyre used to adequately maintain the quality of your home business.
And if youre renting a house or apartment, and use a section exclusively for your business, you may still be entitled to a deduction. But you wont be able to deduct the full amount of your rent, only enough to cover the portion of your home used for business.
Transportation
Are you using a motor vehicle to meet with clients and customers? If so, you can deduct the following costs:
* Gas and oil
* Parking and garage fees
* Leasing payments and insurance
* Depreciation and repairs
* Licenses and registration fees
* Tolls
But if youre traveling to meetings by plane, train, or bus, you may deduct the cost of your tickets. Also, taxicab fares are deductible.
Meals and Lodging
While youre away at your business meetings, youll probably spend money on several necessary items. The following expenses can be deducted:
* Meals
* Hotels
* Telephone calls
* Dry cleaning.
In addition, you can deduct the cost of shipping your baggage, and business materials used during your meeting.
Retirement Plans
Contributions to certain pension plans are also deductible. Eligible plans include the Simplified Employee Pension (SEP) plan, Savings Incentive Match Plan for Employees (SIMPLE), and qualified plans such as the Keogh and self-employed 401(k) plans. And if youre preparing to set up one of these retirement instruments, you may be eligible for a 50% tax credit on the first $1,000 of your start-up costs.
Insurance
You can deduct premiums for various types of insurance related to operating your business, such as:
* Medical and dental insurance
* Motor vehicle insurance
* Theft insurance
* Credit insurance (against bad debts)
* Malpractice insurance
* Disaster insurance
Legal and Professional Fees
The fees you pay to your lawyer and accountant are deductible, but they must be related to the daily operation of your business.
Interest
If youve secured a business loan, you may be able to deduct the accruing interest. This deduction only applies to true debtor-creditor relationships. The loan cant be considered a gift by either you or the lender, and you both must agree that the debt should be repaid.
Bad Debts
If a customer, client, or patient owes you money and fails to pay, you may deduct the amount as a bad debt. Of course, the debt must be strictly business-related.
The subject of taxes is a complex one, and often requires expert consultation. Speak to a tax professional, or read through Publication 334, Tax Guide for Small Business; Publication 535, Business Expense; and Publication 587, Business Use of Your Home (Including Use by Daycare Providers). These documents are available at your local IRS office, on the IRS Web site, or by calling 1-800-829-3676.
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