13 Itemized Deductions You Can’t Afford to Overlook
Many business owners choose to form S Corporations because of federal tax benefits. Under the S Corp regulations, company profits and losses pass through to each individual shareholder and are accounted for on their individual tax returns. This allows shareholders to avoid the double federal taxation experienced by members of a C Corporation, who owe federal taxes as individuals and as members of the C Corp.
If you are an S Corp, or are interested in becoming an S Corp, make sure you are aware of all the S Corp tax deductions you are further entitled to. Being knowledgeable about legitimate tax deductions can make being a shareholder even more personally beneficial than it already can be.
The 13 Most Common S Corp Tax Deductions
The List Your Should Be Taking Advantage of Right Now
- Going into Business Expenses
The costs of getting a business started are capital expenses, which must be deducted over the first five years you are in business.
- Auto Expenses
If you use your car for business, or your business owns its own vehicle, you can deduct some of the costs of keeping it running.
- Professional Fees
Fees you pay lawyers, tax professionals or consultants generally can be deducted in the year incurred. But if the work clearly relates to future years, they must be deducted over the life of the benefit.
- Bad Debts
If someone leaves a business debt with your company unsettled, the bad debt may or may not be deductible–it depends on the kind of product your business sells.
- Business Entertaining
If you pick up the tab for entertaining present or prospective customers, you may deduct 50% of the cost if it is either “directly related” to, or “associated with” a business transaction. On the receipt or bill, always make a note of the specific business purpose–for example, “Lunch with Eleanor Cecconi” to discuss CPA services contract agreement.”
When you travel for business, you can deduct many expenses, including the cost of airfare, costs of operating your car, taxis, lodging, meals, shipping business materials, clothes cleaning, telephone calls, faxes and tips.
- Advertising and Promotion
The cost of ordinary advertising of your goods or services–business cards, pay per click ads, Google Ad Words and so on–is deductible as a current expense. Promotional costs that create business goodwill–for example, sponsoring a peewee football team–are also deductible.
- Education Expenses
You can deduct education expenses if they are related to your current business, trade or occupation, but you must follow strict rules. The expense must be to maintain or improve skills required in your present employment, or be required by your employer or as a legal requirement of your job.
As a general rule, software bought for business use must be depreciated over a 36-month period. Ask your CPA about specific rules and exceptions.
- Charitable Contributions
If your business is an S corporation, it can make a charitable contribution and pass the deduction through to you to claim on your individual tax return.
Taxes incurred in operating your business are generally deductible. How and when they are deducted depends on the type of business tax. Sales tax, excise tax, fuel tax, employment taxes, and real estate tax may all be deductible depending on your situation.
- Moving Expenses
If you move because of your business or job, you may be able to deduct certain moving costs that would otherwise be non-deductible personal living expenses.
- Interest Charges
If you use credit to finance business purchases, the interest and carrying charges are fully tax-deductible. The same is true if you take out a personal loan and use the proceeds for your business.
Business Accountant For Your S Corporation Tax Deductions
Many business owners choose to incorporate as an S Corporation for the tax benefits. Make sure you are taking full advantage of these benefits by educating yourself on the S Corp Tax Deductions listed here. Also, contact an experienced and qualified CPA to help you discover even more legitimate S Corp Tax Deductions that your business is eligible for. Acosta Tax & Advisory PA is experienced with tax deductions for S-Corporations, as well as LLCs, C-Corporations, Partnerships, and LLPs anywhere in the United States. Call us today at 954-239-8365 to schedule your FREE consultation.