Every business firm, whether it is a big wig or small gun, wants to cut down its taxable income. Every penny save is every penny earned, this is what goes around. By converting a part of your taxable income into legitimate tax-deductibles, you can add indirectly to your saving.
Here are some simple ways to soften heavy tax blow by enjoying legitimate tax exemption benefits:
Tax Deduction Benefits for Self-Employed:
It is an obligation for every working professional to pay tax. Amount of tax is more on the self-employed persons. It is often criticized as negative blow to the entrepreneurship. However, IRS has some good schemes to nurse the tax sting for the self-employed individuals.
You will be allowed to deduct half of self-employment taxes from your net income. According to IRS, self-employment tax is a business expenses and the rule of exemption will be applied accordingly. The entrepreneurs will only incur self-employment tax on net business earning or the left-over after subtraction of business expenses.
Home Office Deduction:
It is a complex calculation. You use a workspace to run your business operation. Whether you own or rent a space, the expenses made on it will be regarded as home office expenses. You should be ready with essential documents to defend your right for deduction during audit. You might be asked to submit the necessary documents like a map of the workspace with accurate dimension.
Deductible expenses on your home office include business percentage of mortgage or rent, utilities, property taxes, homeowners insurance, home maintenance expenses per annum. For example, if your home office takes up 20% of your home, then the same percentage on your electricity bills will be subject to deduction.
Phone and Internet:
Even claim has already been made for home office deduction, you are entitled to enjoy tax exemption on internet business phones and fax expenses. Anything that is directly used for your business purpose is subject to tax exemption. If you have a land phone and use it for business calls, there will be no deduction on the monthly basic charges. If anything is added to the basic figure, only that will enjoy 100% business deduction. The same principle will apply to internet use also. Depending on how much you will be using internet for business purpose, the amount of tax deductible will be determined.
Business Credit Card Interest and Interest on Business Loans:
No prize to guess that interest on business loan is considered as business expenses. Credit card interest, on the other hand, has no such facilities. However, if you use the credit card to make business buy, the interest will be exempted from tax. It is always better for anyone to avoid the interest expense on credit card by not overspending your credit limit.
If you own a car and use the same for business trip, you have the right to claim for tax deduction of expenses for the business trips. Know your right and make it sure that you keep an excellent record with your business travel expenses.