Tax Deductible Expenses for Small Businesses

Small business expenses are those expenses that you incur every other day as you run your business. These expenses are usually allowed as deductibles when filing your tax returns. The IRS has defined business expenses as those expenses that must exist and are therefore necessary and ordinary in the business.

In a business that produces goods, any costs that are incurred in the production of a good are considered to be deductibles. A business that deals in the production of quilts is expected to incur expenses in fabric, thread or even batting. Other expenses that it may encounter include freight charges as it receives the materials, storage costs, costs to the factory and even labor costs.

There are rules that are used to determine the expenses that need to be deducted as direct in a business as tax returns are being filed. In order to effectively identify the deductible expenses you should consider hiring a tax accountant who can guide you and determine the IRS laws and regulations that apply to your business. In the midst of all the costs you incur in your business, there are those that can not be included as expenses. The best example of such costs includes the capital expenditures which fall under different classes: Assets Start up costs and Improvements.

A common practice found in small business owners is the fact that they use their own personal income to operate their business. They also incur personal expenses as they run the business, such expenses are not deductible. Your tax accountant can guide you on how to differentiate these expenses and deduct them appropriately. You should follow the advice given as you also keep all the records of your business so that you have an easy time when filing your tax returns.

Green Tax Deductions

There are numerous ways in which you may recognize savings by way of green tax deductions. By making certain eco-friendly choices regarding your purchases or certain home modifications, you may be eligible for tax benefits while at the same time doing something good for the environment. Not only might the environment and your pocketbook be thanking you for your efforts, but you may be improving your home and lifestyle in the process. In many instances, you could be saving 30% of the cost of your purchases or up to a total tax credit of $1500, although certain purchases may … Read the rest

There are numerous ways in which you may recognize savings by way of green tax deductions. By making certain eco-friendly choices regarding your purchases or certain home modifications, you may be eligible for tax benefits while at the same time doing something good for the environment. Not only might the environment and your pocketbook be thanking you for your efforts, but you may be improving your home and lifestyle in the process. In many instances, you could be saving 30% of the cost of your purchases or up to a total tax credit of $1500, although certain purchases may not be governed by this limit.

Heating a Cooling Options

Before you run out and buy a new addition to your HVAC system, you should ensure the product you want to purchase falls within the guidelines of the green tax deduction requirement by visiting www.energystar.gov.  Items such as biomass stoves (stoves that burn biomass fuels), certain hot water heaters, geothermal heat pumps, air conditioning units, furnaces, and boilers could be included in the tax deduction, but you don’t want to spend a bundle of cash on a new unit only to realize that it isn’t eligible for the deduction you were expecting. Furthermore, installations of items such as solar panels and wind turbines which actually generate energy for your home can qualify for up to a 30% federal tax credit.

Home Improvements

There are a variety of home improvements for which you may be eligible when it comes to tax deductions. Work to improve heating and cooling efficiency through fixing cracks and aging seals in your home and the replacement of insulation are simple ways of reducing energy costs in your home while possibly making yourself eligible for a tax deduction in the process.

You may also realize tax savings in the form of energy efficient window replacement, door replacement, roof replacement, other energy loss reduction repairs or modifications, and even the installation of solar panels.

New Homes

Tax breaks are not limited to the renovation of dated homes.  If you’ve built a new more energy-efficient home before January 1st you may be eligible for tax incentives. According to the Energy Policy Act of 2005, if you’ve build a new home that is 50% more in energy savings over the minimum standard you could qualify for a $2000 tax credit.  Those homes which achieve just 30% more energy savings over the standard are still eligible for $1000 tax credit.

Conclusion

Tax deductions can be a great benefit for making environmentally friendly decisions. However, it is important that you fully understand how these deductions apply to you and your situation and ensure that you are making the proper purchases and eco-friendly modifications to meet the guidelines to be eligible for these deductions. It might be helpful to visit the Energy Star website at www.energystar.gov to learn more about available tax credits and terms. If you are still unsure whether the improvements or purchases you are interested in making will result in tax benefits, you may want to consult a tax professional before committing yourself and your money.

Sources:

U.S Environmental Protection Agency. U.S. Department of Energy. Improve Your Home’s Efficiency & Earn Tax Credits. November 16, 2010. http://www.energystar.gov/index.cfm?c=tax_credits.tx_index. December 24, 2010.

Anastacio Mindiola is an accomplished attorney and business owner. His company helps home and business owners protest property taxes in Houston and the surrounding counties. For more information on how you can lower your property taxes visit http://www.republicpropertytax.com.

  • Final Days to Donate for Tax Deduction (doyourpart.com)