Tax Breaks for Small Businesses…whew!
by Rebecca Button on February 5th, 2008
Here’s a quick run down of some tax breaks small businesses may be eligible for (courtesy CNNMoney.com ):
1. File as a shareholder/owner –Available to LLCs and corporations with S-status, this federal tax break keeps the small business from having to file as a corporation thus, avoiding a double tax situation (since they would have to file as a shareholder/owner level in addition, otherwise.)
2. Section 179 small business expensing –Allows a business to take a current deduction up to $125,000 for the cost of assets placed in service during the year for use in the business, not including real estate. Without this benefit, the business owner would need to capitalize the asset and deduct the cost over many years through a depreciation deduction. For example: if a small business purchased a copy machine for $2,000, the entire amount could be deductible in the first year. A larger business would be required to deduct the cost over five years, which is what the IRS considers the life of the asset.
3. Home office deduction –Provides some savings if you legitimately qualify as a home based business. (read more on this in Tax Write-Offs for the Home-Based Business )
4. Retirement plans/commuter benefits/educational assistance –payments are non taxable for employees and deductible for employers.
5. Charitable contributions of inventory –depending on the type of business you own these might be deductible. The major stipulation is that what you donate must be used by the charity specifically for it’s charitable function (ie. food for a food bank).
For more information please read:
4 Easy Steps To Getting Your Business Ready For Tax Season
Small Business Tax Write-Offs You Need to Know About