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12 Tax Tips for Small Businesses

12 Tax Tips for Small Businesses

12 Tax Tips for Small Businesses

If you work from your home, there are a number of tax deductions available to lessen the tax burden for you, as well as other self-employed small business owners throughout the country. Here are 12 tips that everyone who is self-employed should look into, according to www.bankrate.com.

  1. Home Office – The key to deducting a home office is to be sure you don’t also include other parts of the house used by the family. A home office should only be used for your business. Remember that if you use a portion of the den or living room, you can’t claim the entire room. Instead, determine the size of the space you occupy and divide that by the square footage in your home. That percentage is your business deduction on the rent, insurance, utilities, etc.
  2. Office supplies – This is pretty straight-forward, but one tip to remember is that you can deduct the cost of business supplies even if you don’t take a home-office deduction.
  3. Furniture – The value of this deduction varies from business to business. If you regularly bring people into your home office, chairs or a sofa can be included. If you are a hair dresser, the cutting chairs would also qualify, for example.
  4. Other equipment – Most businesses use computers and fax machines. A copy machine and scanner also can be included, if your printer isn’t an all-in-one model. Remember that furniture and equipment can either be deducted in a single year, or they can be depreciated over as much as five years.
  5. Subscriptions and software. Computer software purchased at your local store can be deducted fully in the first year. If you subscribe to magazines related to your occupation, those also can be deducted.
  6. Mileage – The IRS has made figuring out mileage reimbursements for business a little difficult for 2011. But that’s actually good news. In the first half of the year, the rate was 51 cents a mile. On July 1, that increased to 55.5 cents per mile. One important tip in this area: You can calculate the miles you drive for business from your home to your destination. That’s not the case if you work out of a storefront. In that case, the mileage begins when you reach your first destination and ends when you reach your last business destination. Make sure you keep a regular journal of your business mileage.
  7. Travel and meals – The general rule is that the cost of reaching your destination and your hotel bills are completely deductible. However, the cost for meals while on a business trip is only 50 percent deductible. After all, you have to eat, even if you’re on a business trip.
  8. Insurance – If you’re self-employed, you can deduct 100 percent of the cost of your health insurance costs. It’s possible to write off a spouse’s insurance premiums also if they genuinely worked for you during the year.
  9. Retirement plans – You can deduct the cost of yearly payments to IRA or Keogh as someone who is self-employed.
  10. Social Security – As a self-employed business owner, there is no employer to pay half of the Social Security costs. However, you can deduct half of the Social Security tax payments on your taxes.
  11. Phone costs – One important tip in this area for self-employed business owners is to consider using a separate line dedicated only to your business. That way, you can deduct the calls as well as any fees and charges. If you make your calls on the house phone, you can only deduct your long distance business calls.
  12. Child costs – If there is work that a child 17 or younger can legitimately do for your business, you can avoid income taxes on that payment, up to $9,500 a year. Remember, you can also deduct the salary as a business expense, and you don’t have to pay Social Security taxes to a child 17 or younger.

A Dozen Deductions

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