Employee Compensation
Small Business Deductions and Credits
Practically every expense related to business is a write-off. The only thing to determine is how to write off the expense—as a deduction or a tax credit—and whether there are limitations on eligibility, amount of the write-off, or timing for claiming the write-off.
There are many distinct categories of deductions, such as:
- Employee compensation (wages, bonuses, and fringe benefits)
- Travel and entertainment expenses
- Car and truck expenses
- Repairs, maintenance, and energy improvements
- Bad debts
- Rents (for office space, equipment, etc.)
- Taxes and interest payments
- First-year expensing, depreciation, amortization, and depletion
- Advertising costs
- Retirement plan contributions
- Casualty and theft losses
- Home office deduction
- Medical coverage
- Domestic production activities deduction
There are certain deductions unique to farmers and a host of deductions that defy categorization. Knowing what deductions you are entitled to can legally cut your tax bill and save you money.
Tax credits, which are dollar-for-dollar reductions of the taxes you would otherwise owe, can also be used to save money. Again, there are a variety of taxes, including those related to:
- Hiring certain employees
- Owning and fixing up certain realty
- Being "green"
Like deductions, credit eligibility and limits vary, so check to see whether you are entitled to tax credits and how to claim them.
