If you own a business, you are eligible to deduct certain business-related expenses. These include deductions for the following:

  • Home office: If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home.

    Deductible expenses include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation. You want to be very careful here - as the exclusive and regular rule is strict. For instance, if you conduct business in your basement but you also use it as a recreation area for your family, you may not be able to treat it as a home-office for tax deduction purposes.

  • Retirement Plan Costs: If you own a small-business and recently established a retirement plan for the business, you may be eligible to receive a non-refundable tax credit for expenses you incurred to implement the plan. The tax credit may be claimed for a maximum period of three years for retirement plans established after 2001. To be eligible for the credit, you must have no more than 100 employees who earned at least $5,000 in the previous year.
  • Retirement Plan Contributions: If you make contributions to retirement plans, such as a SIMPLE IRA, SEP IRA or qualified plan, you will be able to deduct the contributions, providing they are within the statutory limits. If you are unincorporated, your contributions are based on your modified net profit.

Other deductible business expenses include the cost you pay for advertising, liability insurance, certain vehicle expenses, wages, legal expenses and expenses for professional services. To ensure that you receive the maximum permissible deductions, ensure that the person who prepares the tax return for your business is proficient in that area. Not everyone who can prepare a tax return for an individual can apply the same level of proficiency to a business' tax return.

To read more frequently asked tax questions, see How do I avoid paying excess taxes on securities I have sold?, How can I make sure I'm ready to file my taxes?, Common Tax Questions Answered and How can I make sure I get all my eligible deductions?

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA

  1. How can I make sure I get all my eligible deductions?

    Most tax preparation software does a good job. However, like any recipe, the end results are only as good as what goes into ... Read Answer >>
  2. How can I make sure I'm ready to file my taxes?

    Whether you file your return yourself, or have it done by a tax professional, you want to make sure you include all your ... Read Answer >>
  3. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Answer >>
Related Articles
  1. Taxes

    10 Tax Benefits For The Self-Employed

    Running your own business has both personal and financial perks.
  2. Taxes

    Top Tax Deductions For Brokers

    If you are paying out of pocket, you can make your business expenses work for you at tax time.
  3. Taxes

    The Most Overlooked Tax Deductions

    The receipts you cram into your wallet could be replaced with cash come tax season.
  4. Taxes

    Top Tax Advantages of Buying a Home

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.
  5. Taxes

    5 Overlooked Tax Deductions for Small Businesses

    It's easy for small business owners to miss a few tax write-offs. Here's where to find them.
  6. Small Business

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  7. Taxes

    Top 10 Home Business Tax Tips

    If you work for yourself, make sure you are getting the most for your tax dollars.
  8. Taxes

    Why You Should Itemize Your Tax Deductions

    This strategy of moving your tax deductable payments and donations to the following year could mean hundreds more on your return.
  9. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  10. Taxes

    How To Qualify For The Home-Office Tax Deduction

    Homebodies can save big on their tax bill. Learn how to get in on the action.
  1. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
  2. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  3. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  4. Tax Deduction

    A deduction from gross income that arises due to various types ...
  5. IRS Publication 535 - Business Expenses

    A document published by the Internal Revenue Service (IRS) that ...
  6. Schedule A

    Schedule A is a U.S. income tax form that is used by taxpayers ...
Hot Definitions
  1. Nest Egg

    A substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for ...
  2. Denial Of Service Attack (DoS)

    An intentional cyberattack carried out on networks, websites and online resources in order to restrict access to its legitimate ...
  3. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate and graduate students who demonstrate exceptional ...
  4. Wealth Management

    A high-level professional service that combines financial/investment advice, accounting/tax services, retirement planning ...
  5. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  6. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
Trading Center