Starting a Business: Tax Deductions
Saving on your taxes
is one of the ways to make money, online or off line. Remember it is all
about the bottom line! So the more tax
deductions your
business can legitimately take, the lower your taxes on your profit will be. The
tax code provisions that govern deductions can also help to provide a personal
benefit of a nice car to drive at a small cost. It all depends on paying
careful attention to the IRS rules on just what is deductible. Therefore when
you're adding up your business's expenses at the end of the year, don't
overlook any business tax deductions.
I cannot stress enough to say that you must have records to substantiate
your deductions.
Starting a Business: Tax Deductions
If
you use your car for business, or your business owns its own vehicle, you can
deduct some of the costs of keeping it on the road. You must keep a log of your
mileage.
There
are two methods of claiming expenses. The actual expense method is where you keep track of and deduct all of
your actual business-related expenses. The second one is the Standard mileage rate method. You
deduct a certain amount (the standard mileage rate) for each mile driven, plus
all business-related tolls and parking fees. In 2013, the standard mileage rate
is 56.5 cents per business mile driven.
As
a rule, if you use a newer car primarily for business, the actual expense
method provides a larger deduction at tax time. If you use the actual expense
method, you can also deduct depreciation on the vehicle. To qualify for the
standard mileage rate, you must use it the first year you use a car for your
business activity.
If
your auto is used for both business and pleasure, only the business portion
produces a tax deduction. That means you must keep track of how often you use
the vehicle for business and add it all up at the end of the year.
Once
you're running a business, expenses such as advertising, utilities, office
supplies, and repairs can be deducted as current business expenses, but not
before you open your doors for business. The costs of getting a business
started are capital
expenses, and you may deduct $5,000 the first year you're in
business; any remainder must be deducted in equal amounts over the next 15
years.
With
many businesses, you will suffer losses during the first few years of
operation, you might be better off taking the deduction over five years, so
you'll have some profits to offset.
Business
books, including those that help you do without legal and tax professionals, are fully
deductible as a cost of doing business.
Fees
that you pay to lawyers, tax professionals, or consultants generally can be
deducted in the year incurred. However, if the work clearly relates to future
years, they must be deducted over the life of the benefit you get from the
lawyer or other professional.
Bad
debt may or may not be deductible as it depends on the kind of product your
business sells.
If your business sells goods, you can deduct the cost of goods
that you sell but aren't paid for.
However if your business provides services, no deduction is
allowed for time you devoted to a client or customer who doesn't pay.
Entertaining
present or prospective customers, you may deduct 50% of the cost if it is
either, directly related to the business and business is discussed at the event.
Or associated with the business, and the entertainment takes place immediately
before or after a business discussion.
Make notes on the receipt or bill, always make a note of the specific
business purpose.
When
you travel for business, you can deduct many expenses, including the cost of
plane fare, costs of operating your car, taxis, lodging, meals, shipping
business materials, cleaning clothes, telephone calls, faxes, and tips.
Even
before you start your Business adventure whether it is online or not understand
that TAXES can mean the difference of whether you make a profit and do well or
not. Explore all the tax deductions and ways to make money online.
Do not
forget to keep records. DOCUMENT,
DOCUMENT!
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