“Nothing is more expensive than a missed opportunity.” — H. Jackson Brown Jr.
Too many small businesses fail to take advantage of thousands of dollars in tax deductions owed to them simply because they don’t know about them. Working with an experienced CPA throughout the year can make a huge difference when tax time rolls around.
Here are 10 top tax breaks for small businesses that can save you money:
1. Section 179 deduction. Thanks to the economic stimulus package signed by former President Bush, there has been a one-time tax code change that applies to writing off equipment you purchased in 2008. You can now deduct 100% of furniture, computer equipment and related property up to $250,000.
2. Bonus depreciation. In addition to the Section 179 deduction, you can also depreciate the value of most new assets (including machinery, equipment, furniture, etc). “In some cases, as much as half of the cost can be written off even if your business is not profitable,” says Mike Martin, an accredited tax advisor and president of Mike Martin & Associates. This deduction is most useful if you exceed the Section 179 deduction.
3. Business vehicle. You can claim business use mileage as a tax deduction if your business requires transportation. For 2008, the mileage rate is 50.5 cents per mile. Careful record keeping is essential, however. David R. Levi, a director at CBIZ MHM, LLC, the eighth largest accounting services provider in the country, cautions, “Not reflecting some level of personal use for the owner can also be a red flag" for the IRS.
4. Home office. You can deduct a percentage of mortgage or rent, utilities, insurance, Internet service, etc. This claim is often a red flag for the IRS, so be sure to have your documentation in order.
5. Telephone. If you have a cell phone exclusively for your business or a second line in your home, you can deduct the charges.
