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INCOME TAX DEDUCTIONS FOR BUSINESSES
Businesses can reduce their tax obligation through qualified deductions. Business deductions are governed by Section 162 of the Internal Revenue Code. IRS regulations and tax law allow nearly all business-related expenses which are not excessive and which are “ordinary and necessary”. “Ordinary and necessary” expenses are those which help the business to earn income. Consultation with an experienced tax attorney can help you to maximize your deductions.
There are a number of expenses which are commonly used as deductions, including:
Office supplies and expenses. Businesses can deduct reasonable expenses, including supplies, rent, insurance and utilities such as electricity. These expenses can also be deducted by home businesses.
Travel. Deductible business travel costs can include plane tickets, hotel lodging, and car rental. These costs must be business-related and reasonable. Businesses can also deduct the cost of any driving done for business purposes, including insurance, gasoline, repairs and maintenance. Generally, businesses deduct these costs by tracking mileage.
Meals and entertainment. Businesses can deduct half of the cost of business-related meals or entertainment. To qualify, these meals or events must also include a business-related discussion. These costs must also be reasonable, ordinary and necessary.
Legal and other professional services. Payments to attorneys, consultants, accountants, architects and other professionals can be tax-deductible.
Depreciation. Businesses can take deductions for the depreciation (or loss of value due to time and usage) of their property, such as furniture, equipment, machinery and vehicles. This can be taken as a one-time deduction or divided between tax years.
Startup costs. New businesses can deduct costs involved in starting a business, such as research, advertising, and operating expenses. These can be divided over the first sixty months of operation.
Business deductions can be extremely valuable and extremely complicated. Your tax planning should include a (deductible) consultation with a tax attorney in order to save the most possible money and increase your business income.