If you are a small business owner, you need to familiarize yourself with the Internal Revenue Service's information on all the ways in which your small business can write off certain costs -- expenses that, in many cases, most taxpayers aren't allowed to deduct from their individual tax returns. You can check out IRS Publication 535, among others, for specific rules and regulations. Here's a list of seven items that a small business owner can write off that other people can't:
- Dining and Entertainment -- There's this old joke: Two geezers are having lunch at the local deli. First guy says to the second guy, "Ask me how's business." "Okay, how's business?" "Lousy. Thanks for asking." "Too bad. But why'd you ask me to ask?" "Cos now it's a business lunch. I can write if off!" Maybe not so funny, but all too true. If you discuss any business matter with an associate, partner, potential client, vendor or a competitor, you can deduct 50% of the total cost of the meal -- no matter how expensive. And don't forget to attend a show together after you've finished eating. You can also deduct 50% off the ticket price. The rest of us will have to settle for take-out and reruns of "Frazier" at home -- both non-deductible.
- Travel -- This fall, I'll be depositing my youngest at her new college -- 1,200 miles away. Don't ask about the costs for air transportation, car rental, lodging and food. It's a lot and it's not deductible. However, travelling for business is. According to the IRS, business travel is any travel away from your place of business overnight and for a purpose that benefits your business. What's deductible? How about: airfare, baggage and shipping, automotive expenses (actual expense or standard mileage), tolls, parking fees, car rental, taxis, hotels, meals, dry cleaning, telephone calls, even tips for the bellboy. So get packing Mr. or Mrs. Business traveler -- you can write it all off.
- Gifts -- Bought a present for your wife's birthday or your kid's graduation? Well done, but don't think of writing it off on your 1040 Schedule A. You can't. However, if you bought a bauble for someone in your office, you can deduct up to $25 -- and there's no limit on how many people can receive business gifts during the year. So get generous and throw an office party. Just remember to keep the cost of the presents around 25 bucks -- and then charge them to Uncle Sam.
Related: Find promotional gifts for your employees and clients!
- Telephone Calls -- Family plans, calls to friends, unlimited texting, data charges -- the costs all add up. There are four separate cell phones in my family and the bill has climbed to $170 per month! Too bad I don't use my cell for business, because if I did, recent case law and IRS rulings now allow me to write off 100% of my business cell phone expenses as long as I have at least one other dedicated home phone line.
- Home Office -- If you use any part of your home exclusively for business you can deduct a portion of your rent or mortgage, and utilities -- electricity, heat, trash pickup, etc. -- based on the percentage of space used.
- Books and Publications -- Business books, magazines, newspapers, newsletters and any other professional publications are fully deductible as a cost of doing business. It's the local library for the rest of us if we want to read for free.
- Shipping and Mailing -- Stamps, a post office box, FedEx and UPS charges, and all other shipping and mailing costs are fully tax-deductible. Not so for my Christmas card list.
Author Bio: Al Krulick is an award-winning journalist with dozens of years of writing experience. He writes and blogs for Debt.org.