Small Business Tax Deduction Benefits
Many tax deduction benefits exist for small businesses as a way to encourage the market and give small businesses a much-needed tax break. Knowing what deductions you are eligible for has the potential to make a huge difference in your tax return, perhaps even turning a tax bill into a tax refund.
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Client Meetings
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Small business owners have the right to deduct travel expenses such as gas or mileage to and from a client meeting, parking fees and other associated expenses as part of the cost of doing business. Fifty percent of meals and entertainment used to woo a client's business may also be deducted. However, you must retain the receipts and a log of mileage (if not deducting actual cost of gas) to use as evidence of the business expense.
Home Office
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Many small business owners have an office they use out of their home as a primary place of business. As long as that space is for the regular and exclusive use of your business, you can deduct the space from your taxes. Calculate the percent of space it takes in your home, multiply the percentage by the amount of your annual rent or mortgage payments and the result is the amount you may deduct from your taxes. Note that any dedicated phone lines, Internet connections or other utilities may also be deducted if you meet the criteria.
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Partial Deductions
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Business use of a cell phone or Internet service that also has personal use may be partially deducted under certain circumstances. If a cell phone is purchased and you use it for both business and personal calls, only charges made due to business calls may be deducted from your taxes as a business expense. This is also true of vehicles with mixed use where you may deduct a standard mileage rate instead of calculating actual cost, which is a more complicated calculation in such a case.
Considerations
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Small business owners' personal and business lives often overlap, which is a benefit and consequence of being your own boss. However, it is best when you can separate your business and personal finances as much as possible with different credit cards and checking accounts. If you cannot, and even when you can, keeping detailed records of all your financial transactions and expenses will enable you to take advantage of every tax deduction for which small businesses are eligible, leaving more money in your pocket instead of the government's.
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