From start-up to success, you need to Deduct It! The fastest way for any small business to make more money is to pay less to the IRS. Let Deduct It! show you how to maximize the business deductions you're entitled to -- quickly, easily and legally. Comprehensive -- yet easy to read with many interesting and relevant examples -- the book is organized into practical categories featuring common deductions, including: -start-up expenses -operating expenses -health deductions -vehicles -travel -entertainment -meals -inventory -equipment and many more The 2nd edition is completely updated with all the latest tax information and numbers for 2006. Whether your business is just starting or well established, Deduct It! is indispensable to your venture!

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Tax Deduction Basics Introduction The tax code is full of deductions for businesses -- from automobile expenses to wages for employees. Before you can start taking advantage of these deductions, however, you need a basic understanding of how businesses pay taxes and how tax deductions work. This chapter gives you all the information you need to get started. It covers: -how tax deductions work (Section A) -how businesses are taxed (Section B) -how to calculate the value of a tax deduction (Section C), and -what businesses can deduct (Section D). A. How Tax Deductions Work A tax deduction (also called a tax write-off) is an amount of money you are entitled to subtract from your gross income (all the money you make) to determine your taxable income (the amount on which you must pay tax). The more deductions you have, the lower your taxable income will be and the less tax you will have to pay. 1. Types of Tax Deductions There are three basic types of tax deductions: personal deductions, investment deductions, and business deductions. This book covers only business deductions -- the large array of write-offs available to business owners. a. Personal Deductions For the most part, your personal, living, and family expenses are not tax deductible. For example, you can't deduct the food that you buy for yourself and your family. There are, however, special categories of personal expenses that may be deducted, subject to strict limitations. These include items such as home mortgage interest, state and local taxes, charitable contributions, medical expenses above a threshold amount, interest on education loans, and alimony. This book does not cover these personal deductions. b. Investment Deductions Many people try to make money by investing money. For example, they might invest in real estate or play the stock market. These people incur all kinds of expenses, such as fees paid to money managers or financial planners, legal and accounting fees, and interest on money borrowed to buy investment property. These and other investment expenses (also called expenses for the production of income) are tax deductible, subject to certain limitations. Investment deductions are not covered in this book. c. Business Deductions People in business usually must spend money on their business -- for office space, supplies, and equipment. Most business expenses are deductible, sooner or later, one way or another. And that's what this book is about: the many deductions available only to people who are in business (sole proprietors, independent contractors, and small business owners). 2. You Only Pay Taxes on Your Business Profits The federal income tax law recognizes that you must spend money to make money. Virtually every business, however small, incurs some expenses. Even someone with a low overhead business (such as a free-lance writer) must buy paper, computer equipment, and office supplies. Some businesses incur substantial expenses, even exceeding their income. You are not legally required to pay tax on every dollar your business takes in (your "gross income"). Instead, you owe tax only on the amount left over after your business's deductible expenses are subtracted from your gross income (this remaining amount is called your "net profit"). Although some tax deduction calculations can get a bit complicated, the basic math is simple: The more deductions you take, the lower your net profit will be, and the less tax you will have to pay.

 

From start-up to success, you need to Deduct It! The fastest way for any small business to make more money is to pay less to the IRS. Let Deduct It! show you how to maximize the business deductions you're entitled to -- quickly, easily and legally.

Introduction: How to Use This Book A. Who Can Use This Book B. Why You Need to Know About Tax Deductions C. The Ever-Changing Tax Laws D. Icons Used in This Book 1. Tax Deduction Basics A. How Tax Deductions Work B. How Businesses Are Taxed C. The Value of a Tax Deduction D. What Businesses Can Deduct 2. Beating the Hobby Loss Rule A. What Is a Business? B. Tax Consequences of Being a Hobbyist C. Income-Producing Activities 3. Start-Up Expenses A. What Are Start-Up Expenses? B. Starting a New Business C. Buying an Existing Business D. Expanding an Existing Business E. When Does a Business Begin? F. How to Deduct Start-Up Expenses G. Expenses for Businesses That Never Begin H. Organizational Expenses I. Avoiding the Start-Up Tax Rule's Bite 4. Business Operating Expenses A. Requirements for Deducting Operating Expenses B. Operating Expenses That Are Not Deductible C. Tax Reporting 5. Deducting Long-Term Assets A. Long-Term Assets B. Section 179 Deductions C. Depreciation D. Tax Reporting and Record Keeping for Section 179 and Depreciation 6. Inventory A. What Is Inventory? B. Deducting Inventory Costs C. Maintaining an Inventory D. Determining the Value of Inventory 7. The Home Office Deduction A. Qualifying for the Home Office Deduction B. Corporation Employees C. Calculating the Home Office Deduction D. IRS Reporting Requirements E. Audit-Proofing Your Home Office Deduction F. Deducting an Outside Office or Workplace 8. Car and Local Travel Expenses A. Deductible Local Transportation Expenses B. The Standard Mileage Rate C. The Actual Expense Method D. How to Maximize Your Car Expense Deduction E. Other Local Transportation Expenses F. Reporting Transportation Expenses on Your Tax Return 9. Business Travel A. What Is Business Travel? B. What Travel Expenses Are Deductible C. How Much You Can Deduct D. Maximizing Your Business Travel Deductions 10. Meal and Entertainment Expenses A. What Is Business Entertainment? B. Whom You Can Entertain C. Deducting Entertainment Expenses D. Calculating Your Deduction E. Reporting Entertainment Expenses on Your Tax Return 11. Hiring Workers A. Employees Versus Independent Contractors B. Tax Deductions for Employee Pay and Benefits C. Reimbursing Employees for Business-Related Expenditures D. Employing Your Family or Yourself E. Tax Deductions When You Hire Independent Contractors 12. Retirement Deductions A. Why You Need a Retirement Plan (or Plans) B. Individual Retirement Accounts-IRAs C. Employer IRAs D. Keogh Plans E. Solo 401(k) Plans 13. Medical Expenses A. The Personal Deduction for Medical Expenses B. Deducting Health Insurance Premiums C. Adopting a Medical Reimbursement Plan D. Health Savings Accounts 14. Additional Deductions A. Advertising B. Business Bad Debts C. Casualty Losses D. Charitable Contributions E. Clothing F. Dues and Subscriptions G. Education Expenses H. Gifts I. Insurance for Your Business J. Interest on Business Loans K. Legal and Professional Services L. Taxes and Licenses M. Domestic Production Activities 15. Record Keeping and Accounting A. Basic Record Keeping for Tax Deductions B. Records Required for Specific Expenses C. How Long to Keep Records D. What If You Don't Have Proper Tax Records E. Accounting Methods F. Tax Years 16. Claiming Tax Deductions for Prior Years A. Reasons for Amending Your Tax Return B. Time Limits for Filing Amended Returns C. How to Amend Your Return D. How the IRS Processes Refund Claims 17. Staying Out of Trouble with the IRS 18. Help Beyond This Book Index

Stephen Fishman received his law degree from the University of Southern California in 1979. After stints in government and private practice, he became a full-time legal writer in 1983. He has helped write and edit over a dozen reference books for attorneys. He is the author of Software Development: A Legal Guide, Copyright Your Software, The Copyright Handbook, Consultant & Independent Contractor Agreements, Wage Slave No More: Law & Taxes for the Self-Employed, and Hiring Independent Contractors: The Employer’s Legal Guide, all published by Nolo.com.

--Products by Stephen Fishman, Attorney:--

-Choose the Best Legal Entity for Your One-Person Business

-Consultant & Independent Contractor Agreements

-The Copyright Handbook: How to Protect & Use Written Works

-Copyright Your Software

-Deduct It! Lower Your Small Business Taxes

-Every Landlord's Tax Deduction Guide

-Home Business Tax Deductions: Keep What You Earn

-How to Safely & Legally Hire Independent Contractors

-Nondisclosure Agreements: Protect Your Trade Secrets & More

-The Public Domain: How to Find Copyright-Free Writings, Music, Art & More

-Web & Software Development: A Legal Guide

-What Every Inventor Needs to Know About Business & Taxes

-Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants

-Working With Independent Contractors

 

Deduct It! by Stephen Fishman
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