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Federal Tax Itemized Deductions

By Kris Anderson

Whether you are looking to start a new home business or currently operate one, knowing about the tax deductions available to you can reap huge benefits for your business around tax time. There are many deductions that you may be eligible for including…

1. Start-Up Expenses- If you are not yet in business you are not eligible for any deductions. When you actually begin the business, many of the expenses you incurred during start-up are deductible over the first 60 months you are in business. Expenses may include web design, advertising, research, travel expenses, and operating expenses (rent, phone, supplies, and utilities).

2. Office Expenses- The rent and utilities that you spend on an outside office or other workspace are eligible for deductions. If you operate from a home office, you can also deduct costs associated with it. An example of home office expenses is your rent and some utilities. Contact your tax professional for advice.

3. Supplies- A business supply is defined as an item that you finish using in less than one year. Excellent examples are pens, paper, and postage stamps. Oftentimes these smaller expenses are overlooked but they add up quickly.

4. Insurance- If you operate from a home office, you may deduct a portion of your homeowners insurance. Self-employed people are also allowed to deduct 100% of their health insurance premiums from their income taxes. Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

5. Professional and Legal Services- Any business related fees that you pay to accountants, consultants, attorneys, and other professional can be deducted. Consulting a tax professional is recommended.

6. Vehicle Deductions- Deductions for car and truck expenses is the most popular with small businesses. All driving costs are tax deductible, with the exception of your commute to and from work. To track your expenses you can track all your expenses including (gas, repairs, and oil) or use the standard mileage rate. The standard mileage rate as of December 31, 2005 was 48.5 cents.

7. Business Travel- These deductions include transportation to and from destination, fares encountered at you destination (taxi, commuter bus, airport limos), baggage and shipping, rental car, 50% of meal expenses, dry cleaning and laundry, telephone, and any tips or gratuities for any of the above.

8. Entertainment and Meals- Restaurant and entertainment costs can be deducted at a rate of 50% if you have a serious business discussion during, before, or soon after the event.

These are examples of deductions that you may be eligible for in the operation of your home business. It is highly recommended that you consult your tax professional for additional information and specifics.

About the Author: Kris Anderson has more than ten years of experience in management and the home based business industry. He is the owner of http://www.homebasedreview.com, a home business resource site.

Source: www.isnare.com