Top Tax Deductions for Your Small Business

Don't miss these fourteen tax deductions for your small business.

It's simple: The more tax deductions your business can legitimately take, the lower its taxable profit will be. Also, in addition to putting more money into your pocket at the end of the year, the tax code provisions that govern deductions can also yield a personal benefit: a nice car to drive at a small cost, or a combination business trip and vacation. It all depends on paying careful attention to IRS rules on just what is -- and isn't -- deductible.

When you're totaling up your business's expenses at the end of the year, don't overlook these 14 common business deductions.

1. Auto Expenses - 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. Mastering the rules of car expense deductions can be tricky, but well worth your while.
2. Expenses for going into business - The costs of getting a business started are capital expenses, $5,000 of which you may deduct the first year you're in business; any remainder must be deducted in equal amounts over the next 15 years.
3. Education Expense - You can deduct education expenses if they are related to your current business, trade, or occupation. The expense must be to maintain or improve skills required in your present employment, or be required by your employer or as a legal requirement of your job. The cost of education that qualifies you for a new job isn't deductible.
4. Legal and Professional Fees- 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.  Business books, including those that help you do without legal and tax professionals, are fully deductible as a cost of doing business.
5. Bad Debts - If someone stiffs your business, the bad debt may or may not be deductible -- 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.  If, however, your business provides services, no deduction is allowed for time you devoted to a client or customer who doesn't pay.
6. Business Entertaining - If you pick up the tab for entertaining present or prospective customers, you may deduct 50% of the cost if it is either:
7. Travel - 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.
8. New Equipment - Some small businesses can write off the full cost of some assets in the year they buy them, rather than capitalizing them -- deducting their cost over a number of years.  Download the full article for more detail
9. Interest - If you use credit to finance business purchases, the interest and carrying charges are fully tax-deductible. The same is true if you take out a personal loan and use the proceeds for your business. Be sure to keep good records demonstrating that the money was used for your business.
10. Moving Expenses - If you move because of your business or job, you may be able to deduct certain moving costs that would otherwise be non-deductible personal living expenses. To qualify, you must have moved in connection with your business (or job, if you're an employee of your own corporation or someone else's business). The new workplace must be at least 50 miles farther from your old home than your old workplace was. (Technically, moving expenses aren't business expenses; there's a special place to list them on your Form 1040 tax return.)
11. Software - As a general rule, software bought for business use must be depreciated over a 36-month period, but there are some important exceptions:

Computer software placed in service from January 1, 2003 to December 31, 2010 is eligible for a Section 179 deduction, which means that 100% of the cost of software can be deducted in the year purchased. Starting in 2011, you will no longer be able to use Section 179 to deduct off-the-shelf software.

      When software comes with a computer, and its cost is not separately stated, it's treated as part of the hardware and is depreciated over five years. However, under Section 179, you can write off a whole computer system (including bundled software) in the first year if the total cost is less than a certain amount ($250,000 in 2009; scheduled to go down to $133,000 in 2010). See IRS Publication 946, How to Depreciate Property.

12. Charitable Contributions - If your business is a partnership, a limited liability company, or an S corporation (a corporation that has chosen to be taxed like a partnership), your business can make a charitable contribution and pass the deduction through to you, to claim on your individual tax return. If you own a regular (C) corporation, the corporation can deduct the charitable contributions.
13. Taxes - Taxes incurred in operating your business are generally deductible. How and when they are deducted depends on the type of tax.  Down the complete document for details.
14. Advertising & Promotion - The cost of ordinary advertising of your goods or services -- business cards, yellow page ads, and so on -- is deductible as a current expense. Promotional costs that create business goodwill -- for example, sponsoring a peewee football team -- are also deductible as long as there is a clear connection between the sponsorship and your business.

Download the complete document for your records.

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Resources to assist you with Payroll & Tax Table Updates

If you have questions about U.S. Payroll tax updates there are several resources, in addition to this document, to assist in answering your questions.

(https://mbs.microsoft.com/customersource/support/downloads/taxupdates/)

Look here to find out the tax changes included in each update and to download the update. All instructions for downloading and installing the tax updates also are provided here.

Knowledge Base

(https://mbs.microsoft.com/knowledgebase/search.aspx)

Provides you with instant access to the same database our support engineers use. You can find answers to common questions, along with technical tips and performance recommendations.

Discussion

(https://mbs.microsoft.com/customersource/newsgroups/)

Start a tax update discussion with other members of the Microsoft customer community. This database provides you with the opportunity to exchange information with other customers, which is perfect for providing tips and answers to questions about tax updates.

Learn more

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Great Plains Tip - Drill into Views within a SmartList

· SmartLists will open related windows when you select a record.

· Double Click on a record to open the default window.

· Use the Go To in the upper right hand corner to select other Card or Inquiry views.

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