If you are a small business owner, there are several deductions available to you if you know what to watch out for. To reduce your tax liability and save money with the Internal Revenue Service (IRS) each year, there are some common deductions to keep in mind:
Deductions for Start-Up Costs: These deductions are for expenses garnered with you start up your business. You are allowed to deduct up to $5,000 in start-up and up to $5,000 in organization expenses during the first year of your business operation. If the expenses were incurred after Oct. 22, 2004, you can make the deductions. There are various rules if your expenses are made before this date or if the costs exceed $50,000. Any expense that is not covered may be amortized over a 180-month period when you open your business. This can include employee training, advertising, market research and other expenses.
Education Deductions: read Publication 970 if you want to know how to deduct educational expenses. As a rule, employers can deduct employee educational expenses only if the courses help improve job-related skills or if that course is needed for an employee to continue working for the company. Self-employed business owners can also write off some educational expenses like transportation to and from school.
Deductions for Vehicles: make sure if you are considering this type of deduction you keep detailed records. You are allowed to deduct such expenses by either the gasoline amount or by the mile, as well as maintenance expenses. If you use your personal car for business reasons, make sure to keep a record of where you went and why. If your employees use a business car for their personal use, make note of the value in their W-2 forms or wage records. You can save even more by using eco-friendly cars. Hybrids, for example, give you up to a $3,150 credit on your taxes.
Cell Phone Bill: your mobile phone bill is another tax deductible item if it’s a part of your business. Just don’t make the mistake of using it for a lot of personal calls. Again, keep good records and keep the actual phone bill as proof that a lot of the calls are business calls.