Small Business Taxes FAQ
Answers to common tax questions on tax deductions for small businesses.
» What is -- and isn't -- a tax deductible business expense?
If I use my car for business, how much of that expense can I write off?
Can I claim a deduction for business-related entertainment?
What is the difference between current and capital expenses?
If I buy a new computer system this year, do I have to deduct the cost over a five-year period?
I am planning a trip to a trade show. Can I take my family along for a vacation and still deduct the expenses?
I work in my home part time. Can I take the home office tax deduction?
I want to start my own small business. What do I have to do to keep out of trouble with the IRS?
Does incorporating a small business start-up offer tax breaks?
Is it safe and sensible for me to keep my own books and file my own tax returns?
I am hiring people to help out with a big job coming up. Are they considered independent contractors or new employees?
What is -- and isn't -- a tax deductible business expense?
Just about any "ordinary, necessary, and reasonable" expense that helps you earn business income is deductible. What's ordinary and necessary? The IRS has defined this as anything that's "helpful and appropriate" for your business. For example, buying a computer, or even a sound system, for your office or store can be an ordinary and necessary business expense. Buying the same items for your family room cannot be a business expense, however.
A few things are specifically prohibited by law from being deducted even if the expenses are for the purpose of conducting business -- for instance, a bribe paid to a public official. Other deduction no-nos are traffic tickets, your home telephone line, and clothing you wear on the job, unless it is a required uniform. For more information, see Understanding Small Business Tax Deductions.
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