Small Business Tax Advantages are Still Awesome

Entrepreneurs will give you a number of reasons why they started their own business, and always high on the list would be the small business tax advantages they enjoy. This is why many hobbies are converted into businesses, as there can be profit along with fun and a business tax advantage in passing what were hobby costs over to business expenses. There are business vs. hobby guidelines to help in getting the best results.

Of course, the type of income and expenses will depend upon the type of business, but there are some general business tax write-offs that are common to most businesses. Large portions of the tax code are written to benefit small business.

Write-offs as Small Business Tax Advantages

  • Some personal expenses can be converted to legitimate business expense deductions:
    • Business use of a vehicle
    • Home office expense
    • Materials and other costs for previous hobby that is now a business
  • Certain equipment used for business, such as computers, printers, etc.
  • Office supplies
  • Marketing and sales expenses, including the cost of a website for the business.
  • Professional services for the business, such as bookkeeping, accounting, legal, and consulting
  • All expenses for the creation of products and the provision of services that are sold in the course of business
  • Allowable expenses for business entertainment and travel
  • Expenses for the operation and maintenance of a place of business, such as an office, manufacturing facility, or retail store
  • Depreciation of certain equipment purchased for exclusive use in the business
  • Deductions for contributions to allowable retirement plans for owners and employees
  • All expenses related to employee compensation and benefits
  • Rents paid for office or business space as well as equipment rented for the business

There are many other categories of allowable business expenses that are specific to the type of business, but it is easy to see that there are a lot of tax advantages in operating a business.

Depending on the structure of the business, there are other tax advantages. Businesses formed as pass-through entities are only taxed once. The S-Corporation is an example, as the profits are passed through to owners and taxed once as personal income on owner returns. Partnerships and most LLCs, Limited Liability Companies, are also pass-through entities for taxation.

Getting All of Your Small Business Tax Advantages

Estimates of the size of the United States Internal Revenue Service tax code are as high as 70,000 pages and over 4 million words if all the code and related regulations are consideredi. Logical thinking should clearly indicate that legally enjoying all small business tax advantages demands that you work with professionals. A tax consultant is a great asset for any business, as their job is to keep up with the business tax code’s applications to small business.

Hire the expertise you need, and you will find that the last and greatest tax haven for the individual is to own a business to enjoy small business tax advantages.

i How many words are in the tax code? – TaxFoundation.org

Primary phrase “business tax” at 1.8% density.

Secondary phrase “small business tax advantages” at 1.2% density.

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