Since deducting expenses from your top-line revenues reduces your tax burden, it’s easy to be too aggressive in claiming them. However, not deducting all that you are allowed leaves money on table. Use the following checklist of rules to reduce your taxable income as much as legally possible. (Note: Due to the complexity of tax laws, a great accountant will save your company lots of money.)
Checklist of Tax Deductions for Small Business
1. Employees’ Pay. You can deduct the pay you give your employees as long as the pay is in cash, property or services.
2. Inventory (Cost of Goods Sold). Businesses that manufacture products or purchase them for resale can deduct the cost of goods sold.
3. Employee Benefits. Benefits like health plans, adoption assistance, educational assistance, and life insurance for your employees are generally tax deductible.
4. Profit-Sharing or Pension Plans. You can deduct contributions you make to your employees’ SEP, SIMPLE, and other qualified plans.
5. Home Office. To calculate how much of the home-related expenses are tax deductible, measure your work area and divide by the square footage of your home. The resulting percentage is the fraction of rent, mortgage, insurance, electricity, housekeeping, etc. that you can claim. Make sure your home office is dedicated to your business work. Claiming your entire living room because that’s where your laptop is will get you in trouble if the auditor comes knocking.
Continues at: 31 Small Business Tax Deductions : Money :: American Express OPEN Forum.
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