Common Small Business Deductions

Starting a small business is a great way to supplement your income. They generally don't need to operate out of a storefront (at least in the very beginning); they can be run from the comfort – and economy – of your home. Generally speaking, the government looks kindly on small business owners. They applaud the entrepreneurial spirit upon which this country is built (knowing also that the vast majority of all U.S. jobs have their source in small businesses), and they reward it with tax deductions to lower the owner's taxable income and help the business to succeed. Unfortunately, many owners end up paying more taxes than they should because they're not aware of ordinary deductions that are available. Though this is by no means an exhaustive list, here are ten of the most common:

1. Start-up costs. One of the biggest obstacles for a new business is getting over the hurdle of start-up costs. Although it can take a large slice out of the overall pie, you can get back a portion of those expenses at tax time. Small businesses can deduct as much as $5,000 of starting costs in their first year of business.

2. Vehicle use. The government allows you to deduct certain expenses for business vehicles, including mileage. Keep good records for this deduction (or any other, for that matter) in case you're challenged on any point by the IRS. If the vehicle is used for business and personal activities, you can deduct only the percentage amount of the business use of the vehicle.

3. Equipment deductions. All businesses require equipment of some kind. The amount can be deducted all at once in the first year of acquisition (up to a limit of $125,000, as of this writing), or amortized over a number of years.

4. Entertainment deductions. Who wouldn't want to have a fancy dinner on the government? Business meetings over dinner or attending business conferences in sunny Florida can be deducted as business expenses, if they meet the necessary requirements.

5. Travel expenses. Traveling for business is a tax-deductible expense. Keep your receipts for airline tickets, hotel stays, and meals. Any service that was necessary during the course of the business trip can generally be deducted. However, expenses for family members that you took along for the ride are not deductible.

6. Advertising costs. Costs for advertising your business are tax-deductible. These may include print, billboard, Internet, radio and television, or other ad forms.

7. Legal fees. Businesses often consult lawyers from about business matters or to review contracts. The fees charged are deductible.

8. Charitable contributions. Charitable contributions are tax-deductible based on the value of the item(s) given. Donated money can be deducted for the actual amount, but goods may only be deducted for the amount received when they were sold by the charity, (not what you may have originally paid for the item). This includes vehicles donated to charity.

9. Software deductions. Small businesses can deduct the cost of software purchased for exclusive use by the business.

10. Educational expenses. The costs of classes taken to further your knowledge for your present business can also be deducted.

Businesses do have an advantage when it comes to taxes. If you're a business owner, take advantage of all the deductions available to you. Be sure to consult a qualified tax professional for further information on these and other tax deductions.