Ten Great Small Business Tax Deductions You May Not Be Using – Part One
When you are running a small business, every day might be the difference between opening tomorrow and going bankrupt. At Hathaway & Kunz ourWyoming business attorneys want small businesses to succeed—they are the backbone to the U.S. economy. That’s why we (with the help of Nolo.com) have compiled a list of the top ten tax deductions for your small business.
- Auto. If you use your car for business, or your business owns a vehicle, you can deduct some of the costs for maintaining it. There are two methods for claiming expenses on your car:
- Actual expense method. Keep track of and deduct all of your business-related expenses.
- Standard mileage rate method. Deduct a certain amount for each mile driven, plus, business related tolls and parking fee. In 2014, the standard mileage rate is $0.56 per mile.
Here’s how they work. If you use a newer car for business, the actual expense method provides a larger deduction, you can also deduct depreciation on the vehicle. To use the standard mileage rate method, you must use the method for the first year you used the car for business activity. Also, you cannot use the standard mileage rate if you have claimed accelerate depreciation or taken a Section 179 deduction for the vehicle in prior years.
- Expenses of Starting a Business. When you are running a business, things like advertising, utilities, office supplies, and repairs can be deducted, but only after you are open for business. You may also deduct $5,000 the first year in business as capital expenses, any remainder must be deducted in equal amounts over the next 15 years.
- Legal and Professional Fees. Resources used for your business are also deductible. For instance, books that help you do without legal and tax professionals. Also, fees from lawyers, CPAs, or consultants can be deducted, but if the work relates to the future, it must be deducted over the life of the benefit.
- Bad Debts. Deduction of bad debts is fairly situational. Here are some pointers:
- If your business sells goods, you can deduct the cost of the goods you sell but aren’t paid for.
- If your business deals in services, no deduction is allowed.
- Business Entertainment. If you spend money on entertaining present or prospective customers, you may deduct 50% of the cost if business is discussed immediately before, during or after the entertainment.
Check back next week for the conclusion and more great tax deductions to earn your small business a bigger refund and more cash.