What kind of deductions can I take as a small business?
When you own a business, you are taxed on your profits, not on your gross income. Profits are calculated by deducting various expenses from your gross receipts. Most common expenses are deductible, but some are subject to limitations and others are not deductible at all. Also, the timing of deductions varies depending on whether you are a cash basis or an accrual basis taxpayer.
Knowing which expenses are deductible is important. If you are a shareholder or partner in a 25% tax bracket, every dollar of deductions saves 25 cents of tax on your income. If you are located in a state that imposes income tax, each write-off is worth even more because it will save you state taxes, too.
To determine whether a you can deduct an expense, ask yourself: Is this expense both ordinary and necessary to the business? Both elements are required by the IRS.
Common small business deductions include costs for:
To be deductible, the IRS requires that a business expense be both ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business). There�s a long list of business expenses you may be able to deduct. They include:
There are also business expenses that are only partially deductible, including:
Look for professional help to prepare your taxes?