Starting your own business is not only fun, it’s can be an exciting chapter in life.
It’s all part of the American Dream, and the best part about it is that after your new business venture finds success, you can also use some of your expenses to lower your business’s tax burden.
There’s a variety of expenses that can be deducted at tax time, from travel to entertainment. Here’s a few.
When getting your business started, keep your receipts for all the various start up costs. For your business’s first year, you can deduct up to $5,000 of start up costs that got the business up and running. You can also deduct up to $5,000 of organizational costs as well. It’s a lucrative deduction, so don’t forget about this one.
Vehicle expenses can also be deducted. These are the expenses that are most closely scrutinized by the IRS, so it’ll be important to keep your receipts and a log detailing the nature of your work-related auto expenses.
You can take advantage of this deduction by saving your receipts for gas or maintenance, or by keeping a log of miles driven for business purposes. Either way, records are key.
Entertainment expenses are another type of expense that can be written off. Up to half of an entertainment expense can be deducted for unreimbursed business meetings. But not just any meeting, however. They have to have a “clear business setting,” so be selective.
Even better news about the entertainment expense is that the limit of deducting half of the expense doesn’t apply if you’re self-employed.
Travel expenses can be deducted as well. Keep a log, and of course keep your receipts. Expenses that fall into this category include transportation, lodging, meals, and dry cleaning.
But don’t be greedy and write off your family member’s expenses, unless he or she is there for a business purpose.
If your business needs to update its software, that expense can be written off too. It’ll just need to be used the same year it’s purchased.
Even some advertising expenses can be written off. If your business is promoting itself (and shouldn’t it?) then use Publication 535 to learn how to deduct the costs of placing ads, making promotional materials, or flying that blimp over the local football game.
Of course, any business may run into legal or financial troubles. It’s unfortunate, but what’s fortunate is that attorney and accountant fees can be tax deductible as business expenses. There are limits though. For example, you can’t deduct the fees used to pay someone to help you buy equipment. Those are essentially part of the purchase cost.
After your business is up and running, the fun part begins. But don’t let these business tax deductions go unused. Uncle Sam wants to see your business make a profit, and lowering your tax bill is certainly part of that.
If your business has tax trouble or needs the help of a tax professional, take a look around at our website to see how we can help.
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