How to Make Small Business Tax Laws Work for You

One of the best ways to make small business tax laws work for you is to maximize deductions. There are so many to find, and mining your business for them prior to and at tax filing is like digging for gold. The more you find, the lower your tax rate and the lower amount of taxes you'll owe. Knowing some of the hidden deductions will help you lower your tax liability.

Depreciation of Business Property

Machinery and other capital assets that you buy for your business will depreciate. Small business tax laws allow you to deduct the depreciation of business property over time, but in general you cannot deduct all of the expense in the first year that you purchase the business property. Your small business tax accountant can advise you on the highest dollar amount you're allowed to claim for the tax year, or your tax filing software will notify you of the amount. Look to previous years as well in case you missed this deduction earlier.

Section 179 deductions allow you take a deduction of the entire cost of business property within the first year. This is not the same as the depreciation of business property just explained. The property costs in this category are viewed by the Internal Revenue Service (IRS) as capital expenses and not capital assets. Some examples of property that might fall under Section 179 include:

  • Printers
  • Computers
  • Software Programs

Capital expenses that are eligible for a Section 179 deduction are not required to be capitalized and depreciated.

Taxes Related to Business

The taxes that you pay in order to run your business can be deducted as business expenses. Taxes at all levels, including city, state and foreign taxes, are deductible. Some business owners are not aware of this benefit and miss out on a major opportunity to make small business tax laws work for them. Ask your tax preparer about deducting tax payments from previous years that you paid and did not claim as deductions.

Education

It's a good use of your time to learn as much as you can about your business industry, and improve the delivery of services to customers. You might want to take seminars, continuing education courses and purchase audio courses on CD. All of those expenses are deductible under small business tax laws. You should only attend classes or purchase educational items as you're able to afford them, without regard to a big tax break in the end. However, you can deduct these expenses and it will help to reduce your tax liability.

Business Gifts

Marketing your business costs money, and some of those expenses are deductible under small business tax laws. Gifts to existing customers, vendors and suppliers or others are effective for brand identity, top of mind awareness and networking. There is a limit on the amount that you can deduct per gift, so it's important to find out the maximum dollar amount for the applicable tax year.

Small business tax laws are complex, and it takes effort on your part to make them work for you. Claiming deductions helps many entrepreneurs stay in business.

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