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In an earlier article, I talked about how you, as a small business owner, can rightfully claim many small business deductions as a way to reduce your taxes. In this article, I’ll present several more. Check to see if you have included these in your tax planning.

1. Travel Expense Write-offs

Your plane fare is a deductible expense — if you have not received a reimbursement from your business. Other transportation expenses are also deductible such as taxi fares, bus, and subway tokens. Associated expenses like dry-cleaning is also deductible. Lastly, meals are an allowable expense, but only half the amount you spend can be deducted.

You can even write off expenses you incur for employees and/or business associates that you are traveling with (friends and family members are out). Consult your tax professional for more details.

2. Deductions for Software

If your business uses customized computer software you can claim the expense of that software as long as you spread out the deduction over three years.

But…Section 179 of the IRS rules allow you take the write-off on computer software all in the first year, IF that software is “off-the-shelf,” in other words, something like Microsoft Office.

3. Deductions for Charitable Contributions

How you handle these deductions depends on how your company is organized. If you are a C-corp, you’ll claim the deduction on your business tax return. However, if your company is a partnership, or an S-corp or LLC, then you’ll take the deduction as a “pass-through” on your personal tax return. This is the same as how you report company income.

If you’re not sure how your company is organized, call your CPA or tax attorney; or call the state in which your company was originally chartered.

Now that we’ve cleared that up, here are some more rules:

You, as an individual, can write off 30-50% of your adjusted gross income as long as the organization you are donating to qualifies as a 501(c)(3)charity or foundation.

A corporation can write off up to 10% of their taxable income.

If you donate more than $250 you’ll need to have a letter from that organization that confirms your contribution. Make sure you read IRS Publication 551 as well as the rules set forth in Section 179. Consult your tax professional for more details.

4. Deductions for Advertising

It’s true: you’ll either advertise your company now, or when you have your going out of business sale. Either way, advertising and marketing expenses are deductible — if they are directly related to your business. They fall under the “Miscellaneous” category of write-offs. Check out IRS Publication 535 and consult your tax professional for more details.

5. Deductions for Legal and Professional Fees

OK, I saved this one for last because it relates directly to the thing I’ve said many times already: “Consult your tax professional for more details.”

Fact is, fees you pay to your attorney and/or accountant are deductible — under certain conditions. For example, you can’t write off professional fees you expend when you buy a business asset (e.g., equipment). In that case, you include the charges in the cost of the purchase.

If you are a sole proprietor you can deduct tax preparation fees on your Schedule C or Schedule C-EZ. Also for sole proprietors, use your Schedule A of your 1040. Consult your tax professional for more details — and don’t forget to ask them about deducting their fees from your tax return.

Conclusion

The US government wants you to succeed in business. So they offer lots of latitude in claiming expense write-offs. So make sure you get what’s yours.

© 2007 Ara Rubyan. This work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 License. You have permission to use it if you include the resource information below.

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Ara Rubyan isn’t an accountant, an attorney, or a financial guru. Instead, he is like you: a consumer who has tried to make an informed decision on the best way to manage his tax obligations.

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As always, consult a qualified professional when looking for tax help. In the meantime, go on over to Your Tax Help Online and have a look.