Log your business expenses regularly and save your receipts to help maintain an accurate accounting of your expenditures. You may need these records to help calculate deductions or to provide to the Internal Revenue Service (IRS) during an audit.
Many businesses take advantage of the following deductions:
• Start-up costs. Companies may incur startup costs for research, advertising, licensing, and other items prior to opening for business. Rather than deducting these costs in the year in which they incur them, businesses can deduct startup expenses in equal amounts over their first five years in business.
• Operating expenses. Day-to-day operating expenses include employee salaries, rent, travel, and more. Businesses can deduct operating expenses in the year in which they incur them. You should, however, familiarize yourself with IRS limits on the amounts you can deduct.
• Inventory costs. Inventory consists of items that you make or buy, then resell. These costs differ from startup expenses. Businesses can deduct inventory costs as they sell the inventory.
• Capital expenses. Land, equipment, machinery, or buildings may qualify as capital expenses. These expenses include long-term investments, as opposed to simple operating costs. The appropriate timing for deductions on capital expenses depends upon several factors, including the size of the business.
• Auto Expenses. You may be able to deduct costs associated with a vehicle you use for business purposes. Small business owners may opt for a deduction based on mileage, or you can measure how often you used your vehicle for business use vs. total use.
• Professional expenses. Business owners can usually deduct expenses associated with retaining an accountant or attorney for the business.
To better understand your individual tax situation and to review all your eligible business deductions, The Company Corporation encourages you to consult your accountant or tax specialist.
- Small Business Tax Deduction Strategies No matches