Tax Deductions 1
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
What Can I Deduct?
One of the benefits of being self-employed is you can take a variety of deductions for which you might not otherwise qualify. If you keep good records and are aware of what you may and may not deduct as a business owner, owning your own business can help you lower your taxes substantially. Here are a number of questions and answers to get you started considering ways your business can cut your personal taxes.
What expenses for starting my business are deductible?
Start-up expenses (expenses you incur before you are ready to take work from customers) are considered capital expenses and have to be either included in basis (the starting value of your business and its assets) or amortized (spread out over several years). To be amortizable, the expense has to be something that is paid before the business started operation and would be deductible if you were already in business.
Such start-up costs include costs of studying a prospective business and the costs for actually launching it such as initial advertising expense, employee training, equipment, etc.
From a tax standpoint, when does my business actually begin? Is it with the first customer?
You can be in business if you are ready to accept customers. The actual event that triggers you being in business (as opposed to starting a business) will vary by the type of business and your own personal way of operating. Something as simple as registering a business name, having business cards made up, or even accepting money for something you have done for free up to now (teaching friends to use computers, for instance) can be the grand opening of a homebased business.
Thus, from a tax standpoint, you might want to consider putting off as many business purchases as you can until after you are actually in business. But remember: While you don't have to have acquired any customers or made a profit to be in business, if you don't make a profit in 3 out of 5 years you could trigger the hobby-loss rule as discussed in the previous chapter.
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
