Hello, I'm Jeremy from TurboTax with important news for small business owners.
If you own a business you now have twice as many rules to deal with and although you may be aware of most of the 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, they 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 by $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 deduct the full cost in the year of purchase. Currently this election covers up to $25,000 in purchases per year.
One last thing you should be aware of is that the losses you incur one year can reduce your taxable income in another. 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.
For more tax tips and guidance, visit TurboTax.com.