It’s start of the year, and it’s time to prepare your taxes for the past year. Bernard B. Kamoroff, C.P.A., author of the book “422 Tax Deductions for Businesses and Self Employed Individuals” (8th edition) offers a number of tips to help you save on your taxes:
Tax Tip 1. Your business expenses are deductible even if you paid them from your non-business bank account, personal credit card, or cash. Take a few minutes and go through all of your expenses for the year. If the expenses were for your business, deduct them. (Does not apply to corporations).
Tax Tip #2. Be careful when labeling expenses “entertainment.” Business expenses such as advertising and promotion are 100% deductible, but entertainment is only 50% deductible. Don’t call an expense “entertainment” unless it really is.
Tax Tip #3. Hire your kids and save a bundle in taxes. You can pay your children under the age of 18 as much as $5,700 a year, write off the wages as a 100% tax deductible payroll expense, and the children owe no federal income or Social Security tax on the income earned.
Tax Tip #4. You cannot deduct charitable donations as a business deduction (unless you are a corporation). If, however, you purchase an advertisement in a charitable organization’s directory or event program, the cost of the ad is fully deductible.
Tax Tip #5. Manufacturers, and some construction, engineering, and architecture firms, software developers, and video producers, are eligible for a 6% “manufacturer’s deduction” for income earned from domestic production. This “bonus” deduction is in addition to the deductions already allowed for manufacturing expenses.
Tax Tip #6. You can go back to school, to take courses that further your education in your current business or that help you operate your business, such as bookkeeping and computer skills, and get a business tax deduction for the cost of tuition, books, fees, and even travel.
Tax Tip #7. Clothing you wear to work is not usually deductible unless the clothing is a uniform or otherwise not suitable for street wear. But if you buy shirts, jackets, hats or other clothing with you business name or logo, the cost is fully deductible.
Tax Tip #8. In most cases, the cost of your inventory (goods for sale) cannot be written off until sold. But if you have damaged inventory, inventory that is out of date or out of fashion or otherwise unsalable, you can write off the cost of that inventory immediately.
For more tax tips, read the article “Seven Tax Tips for Home Businesses”