Small Business Tax Deductions

Small Business Tax Basics

Most small businesses use paid professionals to handle their tax returns.  Even if you use a professional, it's important to understand small business tax basics.  By understanding tax matters, you can save more money.  The more you know, the better you'll be prepared to ask your accountant key tax and financial questions that can save you money.

Small Business Tax Deductions

Every purchase you make for a legitimate business expense may be tax-deductible.  The Internal Revenue Code allows you to deduct all "ordinary and necessary" expenses of operating your business.  These deductions vary from business to business. 

According to the IRS, any small business deductions you claim on your tax return have to be ordinary and necessary.  The IRS interprets "ordinary and necessary" to mean reasonable (routine strategy to generate business) and customary (typical practice for your line of business). 

Before claiming small business deductions, ask yourself two key questions:

• "Are these small business deductions necessary expenses of doing business, i.e. how will they help my business increase its income?"
• "Are these small business deductions customary for my line of business?"

Click here for the most common tax write-offs taken by small businesses. (Requires Adobe Acrobat Reader)  Check with your tax advisor to see if there are additional deductions you can take.