- Category: Business and Non-Profits
- Written by Wendy Levenfeld
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Bonanza or Baloney
While it is often said that owning and operating a small business is the little’s guy’s tax shelter, the reality is that most of the tax law has little or no application to the small business owner. Many believe that any advantages contained in the law end up being a total wash in reality.
Below are areas in which you might be eligible for a tax benefit if you own your own business. You can decide for yourself.
1. Personal Living Expenses: Wholly or Partially deductible:
- Car/50 cents per mile
Disadvantage: detailed records must be kept indicating percent of legitimate business usage
2. Retirement Savings Plans:
- Tax is deferred until you retire
Disadvantages: you have to be profitable enough to put that money aside until retirement and then you pay the tax
3. Family Members Can Be Put on the Payroll:
- Shifts business income to lower tax bracket relatives, benefiting the family unit
Disadvantage: you really do have to employ a family member
4. Travel/Strictly Business:
- Ordinary and necessary business expenses incurred are deductible
5. Home Office Deduction:
- Must use a designated space that is the official location of your business
- Portion of Utilities
- Health Insurance-if eligible: The premium you pay and Out-of-pocket health insurance costs
- Repairs on business only workspace
- Equipment used for business only
CAUTION! … IRS audits of small business owners are quite common so if you are going to take advantage of the above benefits be prepared for the audit.
Three words of advice: receipts, receipts, receipts!