A Tax Deduction Guide for Small Business

By Erica Booth

A quick tax reference guide for small business owners interested in learning about business tax deductions applicable to their business. This guide explains various business expenses that arise from starting a business to fully operating the business.

This reference guide is for informational purposes only. It is not meant to replace the services of a qualified tax professional and should not be relied upon as a formal tax opinion.

• Language: English
• Publisher: BookBaby
• Release date: Aug 5, 2016
• ISBN: 9781483576596

Book preview

References

One of your dreams has been to own and operate a business. This will require a lot of work and commitment, but if you remain focused and diligent, the reward is well worth the effort. However, one area that may cause you some concern is taxes. Startup costs make money tight, but you may find investing in a good tax professional to be a great idea. At this stage of your new business, it is critical that you have a basic understanding of taxes and what you can and cannot do. So let’s start the first round of costs you will incur, business startup and organizational costs.

When you start a business you can treat all of the costs incurred, before operating the business, as capital expenditures. A capital expenditure is the use of funds to obtain a physical asset to be used for productive purposes for at least one year. You can elect to deduct up to $5,000 of business startup and $5,000 of organizational costs paid or incurred after October 22, 2004. Any remaining costs that exceed the $5,000 must be amortized, meaning you have to spread the costs over a period of years. For example, if you purchase computer equipment that totals $6,500, you can deduct $5,000 and amortize the remaining $1,500. Startup costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or