Video transcript:
Hello, I’m Victoria from TurboTax with some helpful tax tips for small business owners.
Although you may be aware of most of your deductible business expenses, there are a few other things you should know about that can potentially reduce the income tax you pay on business earnings.
I am sure you remember how quickly your costs racked up right before you opened the business. Since you incurred these expenses before you opened your doors, some of them are considered startup costs. Generally you can only deduct a small portion of these costs each year but by making an election, you can increase the deduction to $5,000 in your first year.
The cost of running your business after you begin operations can be just as high when you need to purchase expensive pieces of equipment. Ordinarily these costs must be deducted over time through depreciation deductions. However, if you make what is known as a 179 election, you can often deduct the full cost in the year of purchase.
One last thing you should be aware of is that, in certain situations, the losses you incur one year, can be carried over to reduce your taxable income in another, or those losses can be used to offset other income. To keep track, you should hold on to all those prior tax returns. Depending on the type of business you own, TurboTax Home and Business or TurboTax Business can help you with all the deductions you qualify for.
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