Steps to Tips to Optimize Tax Deductions

Written By Steps To Faculty Published September 18th, 2010

Doing the taxes for your business is entirely different from doing them for yourself. You will want to optimize tax deductions as much as possible; not taking deductions is like leaving money on the table. Here are six areas in which you can optimize your tax deductions.

Step 1. Consider operating Costs

Once you open your doors, you will be able to deduct some operating expenses. These include utilities, advertising, repairs, and office supplies. Remember, you can only deduct current expenses, and only those that were incurred after opening. You can also deduct $5,000 of your starting capital the first year you operate.

Step 2. Understand professional and legal fees

If you consult an accountant, lawyer, or other professional, you can deduct the fees for the year in which they occurred. However, the work must relate to the current year. If it does not, the fees can be deducted over the life of the benefit you receive from the consultation.

Step 3. Write down travel expenses

The cost of travel, whether it is by air, car, or rail, is 100% deductible as long as the trip is business related. You can also deduct all of the costs involved in your stay, such as hotel rooms and rental cars. Food, however, is only 50% deductible. Also, keep in mind that once you bring your family along, it is no longer a business trip, even if you are taking a working vacation.

Step 4. Deduct Furniture

If you purchase office furniture, you have another deduction opportunity. You can choose to deduct all of the cost in the same year as the purchase, or you spread the deductions out over seven years to account for depreciation. To deduct the entire cost, you must use the Section 179 deduction, which allows business owners to deduct up to $250,000 as of 2008. To depreciate your furniture, you must use an IRS chart.

Step 5. Use Software

If you need to purchase software for your office, as most do, you will be happy to learn that this expense is also deductible. Generally speaking, software must be depreciated over a period of 36 months, but there are exceptions. These include software bought from January 1, 2003 to December 31, 2010 as well as software that came with the computer. Software in service before December 31, 2010 is eligible for a Section 179 deduction, allowing you to deduct the full cost in the year of purchase. Software that comes with a computer must be depreciated at the same time as the hardware itself.

If you run a limited-liability company (LLC), partnership, or S Corporation, you can deduct charitable contributions on your individual tax return. C Corporations can deduct charitable contributions on the company’s tax returns. Make sure to keep records in case you are audited. Giving away old computers or furniture, as long as it has not been fully depreciated, will also give you tax benefits. Make sure to optimize your deductions to make tax time as stress-free as possible. Please visit stepsto.com for more great business advice.


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