You work hard for your money. So why would you hand more of it over to the IRS than you absolutely have to? Take a look at some of the tax deductions that many small business owners have never even heard of. These are often perfectly justifiable and legal deductions. If you start applying these tax write offs to your own business, you could end up saving thousands of dollars each year.
In Section 179 of the tax code, a small business can deduct up to $108,000 for computers, phones, furniture, and any other business equipment that is put to use before the end of the year. These items must be purchased by the business, you cannot use this write off for leased equipment. This write off also includes things such as paper, postage, copy machines, and any other types of equipment that can be used in the conducting of your business. This equipment expense limit will be increased to $112,000 in 2007. This write off applies for both new and pre-owned equipment, as long as it is new to the company.
Beginning in 2006, commercial buildings that meet or exceed certain stricter energy-savings requirements are eligible for a new energy effecient tax deduction. This deduction can be up to $1.80 per square foot of your building. The "Commercial Building Tax Deduction" establishes a tax deduction for expenses incurred for energy efficient building expenditures made by a building owner. Information on how to get your efficient building certified for the new deduction is available at EfficientBuildings.org.
If your business makes products in the United States you can lop three percent off net profits from domestic production activities on your income. This can result in a very significant tax savings without having to spend any extra to receive the write-off. This deduction is available to any business that produces something within the United States. The definition of production is fairly broad, and includes such activites as selling, leasing, or licensing items manufactured, produced, grown, or extracted within the country; construction or renovation of residential and commercial buildings, as well as engineering and architectural services for American construction projects; software development; and the selling, leasing or licensing of films produced in the U.S. The one catch is the deduction cannot be more than 50 percent of your company's W-2 wages.
Normally the cost of a commercial building is depreciated over a span of 39 years. However, parts of the building that are not structurally integral (like special wiring or flooring) can be depreciated separately over just five to seven years using tan accelerated depreciation method. The more rapid the write-off, the more savings for you up front. To justify such depreciation, you must obtain a cost segregetion study from a certified engineer. This report breaks down these components and their elegibility for accelerated depreciation.
The tax rules for claiming tax write-offs for cars, trucks and vans used for a business can be confusing. There are different limits for leased and owned vehicles, and whether the vehicle is owned by the business itself or the business owner. Here are the key points relating to the use of business vehicles:
These tax write offs can end up saving your business from overpaying thousands of dollars in taxes. To learn more about the powerful money saving benefits of tax deductions, sign up below to receive a tax savings strategy session from a trained tax professional
To learn more tax saving strategies, please see our Tax Write Offs page.