Tax Deductions 6
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Amortizable Costs
- customer list
- legal fees prior to opening
- other start-up costs
- research to start a business
Amortization rules are fairly complex. You can find more information about amortizable costs in IRS publication 535, available on the web at http://www.irs.gov/publications/p535/ch09.html
The items marked with an asterisk (*) are discussed in more detail elsewhere in this chapter.
Can I deduct the sales tax on supplies I bought for my business or only the actual price of the supplies?
You can deduct the sales tax you paid on the price of supplies used in the course of business. You can't deduct sales tax or freight on capital assets used in your business, however. The sales tax on those have to be capitalized in the cost of the asset. (i.e. cost of item + sales tax are basis for depreciation). The tax is not deducted separately.
I translated some documents for a small company, but the company never paid me and is now out of business. Can I deduct the money the company owed me as a bad debt?
Not if you are a cash basis taxpayer as most home based and very small businesses are. A bad debt only qualifies as a deductible expense if there is a true creditor/borrower relationship, if there has been an actual loss of money (you lent the customer money, for instance), or if you are an accrual basis taxpayer and have already reported the debt as income.
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