Business Expenses and Tax Deduction

Expenses – What Expenses are Tax-Deductible?

The more expenses you legitimately deduct, the lower your taxable will be. Here is a summary of expenses that you may deduct to lower taxable profit.

Business Expenses
Expenses to Run Business
Auto Expenses (Cars and Trucks)
Legal and Professional Services
Commissions and Fees
Travel Expenses
Meals and Entertainment
Education Expenses
Taxes and Licenses
Insurance
Bad Debts from Sales or Service
Interest
Software

Expenses to Run Business
This refers to expenses that go into when you operate .

Advertising and Promotion
Office Supplies (Office Expenses): umable supplies such as pens, pencils, paper, pads, books, receipt books, or related supplies
Utilities: including telephone, electricity, gas, water, or sewer on property.
Repairs

You can deduct these current expenses only after you’ve started running .

Notes: If you spent money in these areas to get your started, you can deduct the cost as startup expenses, up to $000 for the first year. The rest of it should be deducted in equal amounts over the next 1 years.

Auto Expenses (Cars and Trucks)
There are two methods for claiming car and truck expense when you use them for purpose or your owns them.

Actual expense method: You can deduct the portion of all the actual expenses paid, including gas, oil, tires, repairs, insurance, licenses, and cleaning. The lease amount can be deductible as well for leased s. If the owner owns the car, they may deduct its depreciation.

Standard mileage rate method (Optional method): You can deduct a certain percentage of each mile driven. You may deduct -related parking fees and tolls as well. The standard mileage rate is 0. cents per mile for January 1, 2008 through June 30, 2008.

Additional expenses – Generally, the standard mileage rate method is regarded to cover most of the expenses listed under the actual method. However, these expenses may be deducted under either method.
portion of any finance charges paid on the purchase of the .
portion of any personal property tax on the .
– Parking fees and tolls

Legal and Professional Services
Fees paid to tax professionals, attorneys, or ultants can be deducted in the year incurred. If the seice is related to future years, it must be deducted over the period that the benefit lasts.

Commissions and Fees
Referral fees or payments paid to independent contractors or individuals can be deductible in the year incurred. This doesn’t include commissions or fees paid to s.

Travel Expenses
You can deduct travel expenses such as plane ets, accommodations, transportation, meals or telephone calls when you travel for . You may combine and entertainment as long as is the primary reason of the trip.

Meals and Entertainment
When there are clear purposes, you may deduct entertainment expenses such as meals or amusement costs that are spent for present or prospect clients or customers. discussion must be held immediately before, after or during the entertainment. Tax deduction of entertainment cost is generally limited to 0% of the total expenses.

– The cost of promotion gifts to present or prospect clients or customers can be deducted up to $2 per client per year.
ets to shows, events, or sports games given to clients for promotion purpose can be deducted.

Education Expenses
Education expenses can be deducted if they are related to your current or trade. They are not deductible if education is for a new job qualification.

Taxes and Licenses
Here is the list of various taxes that you may deduct.

– Real imposed on property used for .
– State or local tax on gross .
– Federal tax paid on is not deductible. State tax on can be deducted as an itemized deduction, but not as a expense.
– Sales tax on items for everyday operations can be deducted as part of the cost of the items, but not deducted separately.
– Employer’s share of employment taxes (Self-employment is not a expense because the tax is paid by individuals, not their es.)

Insurance
You may deduct insurance premiums as an operating expense when it’s for protection of the against losses, such as fire, flood, theft, credit, public liability, workers’ compensation, merchandise and inventory, s disability, or malpractice.

Bad Debts from Sales or Service
You can deduct the cost of sold goods that aren’t paid for when your is selling goods, not providing seice.

Interest
– Mortgage interest is deductable for the property used for .

Note: If it’s a home-based , the portion of mortgage interest is not included here. It should be deducted as a part of the -use-of-home deduction.

– Financial charges on credit cards or interest paid on installment can be deductible if their purchases are made for .

Software
In general, software paid for purpose must be depreciated over a 36-month period.

By Jame, March 2, @ 3:18 am

Hi there, Thanks for sharing your experience!

Jame

Source