But Section 179 of the Economic Stimulus Act of 2008 may allow for small business owners to get even more of their 2008 tax returns this year, especially if the following deductions are claimed:

• Computer software. Though small business owners once had to depreciate the costs of new software over three years, they can now fully expense new purchases during the same year, according to Bankrate.com.
• Meals. The Internal Revenue Service now allows for deductions of up to 80 percent of the meal cost, up from 50 percent, according to Bank of America’s Small Business Online Community. Of course, deductions can only be claimed if such meals are taken while traveling away from home and solely right before, after or during normal business hours.
• Mileage. While careful documentation is always required, this year it can result in a bigger payoff. The standard mileage deduction increased to 50.5 cents per mile for the first half of 2008, only to rise again to 58.5 cents per mile for the second half, according to the Small Business Online Community.

Small business owners: What other deductions should be made but are easily forgotten? Will Section 179 reduce any claims that you have to make this year?

It is important to know that while seeking the help of professionals is advisable, you always want to make sure to do your own research and check for deductions on your own. Make sure that if there is any ambiguity in an IRS regulation that you check with a tax professional or with the IRS before you take a questionable deduction. No matter how great the deduction may be it is not worth getting audited over.

A great place to start is at IRS.gov where there are several publications written in a readable style to help you learn what expenses are considered tax deductible for the self employed. Form 1518, IRS Tax Calendar for Small Businesses and Self-Employed and form 535, Business Expenses, are two excellent informative publications to help you get started learning about deductions.

Making sure you follow the IRS instructions is very important and you need to be aware there are several keys that can lead to your getting audited. Claiming your house as a deduction is the number one alert to the IRS that can lead to an audit. That is not to say that you cannot deduct the correct portion of your house, just make sure that you do it within the guidelines of what the IRS allows.

Travel is another area you want to be very careful about when deducting as a business expense. The IRS has very specific guidelines regarding what is considered business travel and what traveling expenses are eligible for deductions according to the regulations.

Supplies and equipment for your business are deductible and health insurance also may be deducted. If only one member of your family is self employed be aware that you may only be eligible to deduct the self-employed family member’s healthcare costs. If the other family member is eligible for benefits through their employer then you cannot claim the cost of those benefits as a deduction.

Clothing can be deductible but only if it is usable for the business purpose exclusively. If you have a coat that can be worn when you aren’t working then it would not be considered deductible. If however, it is something like a specific fire proof jacket is needed and it isn’t possible or pragmatic to wear it when you aren’t working then that fireproof jacket would be considered tax deductible.

Studying the forms and guides provided by the IRS is a great place to start but also include a visit to your CPA who can take what you have learned and apply their knowledge and experience to maximize your deductions for the upcoming year’s tax liability you face as a self-employed business person.

If your home office qualifies, you may be able to deduct part of your housing expenses on your tax return. Your home office qualifies if it is your principal place of business, and you use it regularly and exclusively for your eBay business.

To pass the ‘place of business’ test, your home office must be the principal place you conduct your business, or a place where you regularly meet clients or customers, or it must be a separate structure not attached to your home. If you store inventory for your eBay business, that may also qualify you for the home office deduction.

Regular and exclusive use means that you spend at least 10-12 hours per week conducting business in your home office, and that you don’t use this room for other purposes. For example, if you use part of the room as a laundry room or children’s play room, you may not qualify for the home office deduction (unless you segregate the separate areas and the ‘business area’ is used only for business purposes).

Expenses that can be deducted include mortgage interest, real estate taxes, utilities, insurance, repairs, security, and depreciation. Only the business use percentage of these expenses can be deducted. The business use percentage is calculated by dividing the square footage of the office space by the square footage of the home, or by dividing the number of rooms you use for business by the number of rooms in your home.

Direct expenses, such as repairs made solely to the room used for your home office, or telephone lines installed just for business use, can be deducted in full. Indirect expenses, such as mortgage interest and real estate taxes should be allocated between the home office deduction and your itemized deductions to get the greatest tax benefit.

Caution: Your eBay business must earn a profit to take the home office deduction. If your home office expenses are larger than your business profits, you must carry the excess expenses forward to future years.

Kristine A. McKinley, CPA, Certified Financial Planner(r), and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on an hourly, fee-only basis. For more eBay tax tips, visit her blog Tax Tips for eBay Sellers .