Contributed by Ronica Brown of the Ronica Brown Agency.
For most business owners the best part of tax season is getting large deductions to lower their tax bill. A tax deduction is a decrease in taxable income based on business spending or use of resources.
But what happens, when a business owner doesn’t understand how much they can deduct? This results in spending in areas where deductions will not be maximized and a possibility of having higher taxes than projected.
Understanding the amount you are able to deduct helps you to plan and spend strategically to get the most value from your spending.
When it comes to tax deductions there are huge misconceptions, the 5 most misunderstood deductions will give you the information you need to maximize your deductions in these areas:
1) Business start-up expenses
Startup expense is defined as any money that you spend before the business starts its operations. These expenses are not fully deductible. The deduction for startup expenses is limited to five thousand dollars ($5,000) and only applicable to businesses with a total start-up cost amount of fifty thousand dollars ($50,000) or less. Businesses that require a large cash investment such as restaurants may not be able to deduct 100% of their start-up cost in the year they spend the money. If business start-up expenses are over $50,000 then you get to amortize or capitalize this amount instead of getting a deduction. Also, segregating the cost such as depreciable assets could help to get you the maximum deduction in a year when your business is up and running.
2) Business Gifts
Continue Reading >>>