Top Ten Tax Deductions Small Businesses Should Know

It’s tax time.  Something none of us can avoid.  But what we can avoid is paying more than what we rightfully owe to Uncle Sam.  Here are ten tax deductions for small businesses that you may overlook.  Make sure you review them before you submit your filing this year.  And it’s always smart to double check with a professional tax-preparer or CPA.

1.  Insurance.  If you have health insurance coverage for your employees, check to see if you are eligible for the small business health care tax credit.  The IRS website has a page describing the credit, eligibility requirement and how to claim.  Only a small percentage of small businesses are currently taking advantage of this tax credit.

2.  Contributions.  Have you donated goods or services to charitable organizations this past year?  You may be eligible to take a deduction for the value of these items.  Be sure to get a valuation for any non-cash items you donate so you’ll have the appropriate documentation to back-up your deduction.

3.  Equipment.  Businesses that spend less than $2 million for equipment in the tax year 2011, may deduct up to $500,000 in equipment purchases as opposed to depreciating the items over five or 10 years.  The cost of repairs may also be deductible even if the repair does not extend the useful life of the equipment.

4.  Software Deduction.  You can deduct software purchases for your small business if you purchase and use the new software within the same year.

5.  Self-Employed Health Insurance.  Self-employed individuals including those filing as a Schedule C, may deduct the amount paid for health insurance premiums on behalf of themselves, their spouses and beginning in March 30, 2010 their child who was under age 27 at the end of 2011, even if the child was not their dependent.

6.  Education Expenses.  You can deduct expenses paid for education to the extent permitted by law, if the education was needed to maintain or improve your skills.

7.  Veteran Hires.  An expanded tax credit is available to business owners who hire certain unemployed veterans.  Don’t overlook the credit if you hired a qualified veteran who started work on or after November 22, 2011 or you plan to hire one before January 1, 2013.

8.   Self-Employment Tax.  You can deduct one-half of your self-employment tax in figuring your adjusted gross income.  This is an income tax adjustment only.  It does not affect either your net earnings from self-employment or your self-employment tax.

9.  Appraisal Fees.  If you incur appraisal fees for casualty losses or charitable donations, these may be deducted.

10.   Research Materials,  Training manuals, videos, subscriptions and books can be considered valid expenses.  Keep official receipts that will prove the materials are essential for the business operations.

You can find much more information about all small business tax deductions and credits on the IRS website.

And you’ll find business growth strategies and advice in my New York Times bestselling book It’s Your Biz.  To purchase a copy visit my website.