It’s getting to be that time of year again, when we’re confronted with that age-old dilemma of what’s deductible and what’s not. Fear no more, Suzette Flemming, owner of Flemming Business Services sets us straight in the following article regarding the top 10 do’s and don’ts of business-related tax deductions and expenses.
Is this deductible?
By Suzette Flemming
In some cases the IRS is very specific and detailed in describing what you can and cannot deduct, however, most of the items fall under their Ordinary and Necessary rule.
An ordinary expense is an item that is common and accepted in your business.
A necessary expense is a purchase that is helpful and appropriate to your business but doesn’t need to be crucial to your business.
Keep in mind what is ordinary and necessary for one business isn’t necessarily ordinary and necessary for another.
Top 10 Forgotten Deductions
- Mileage – Traveling to a client’s place of business, picking up office supplies, and other business related miles can be deducted at a rate of 40.5 cents per mile for January via August of 2005 and 48.5 for September via December 2005.
- Telephone – Any phone line dedicated to your business may be deducted including cell phones, pagers and fax lines.
- Equipment – You can deduct up to $105,000 (for 2005) in equipment in the same year you purchase the items using a Section 179 deduction. This is takes the place of depreciation.
To learn about the rest of the deductions click here.
Top 10 Non-Deductible Expenses
- Mileage – Miles traveled commuting to your office isn’t deductible. Likewise, miles traveled for personal errands while also traveling for business purposes can’t be deducted. For example, if you go to the post office to mail business papers, stop at the grocery store for dinner, drop by the office supply store then return to the office, the miles from the post office to the grocery store are not deductible.
- Telephone – The charges for the main phone line coming into your home (if you work from home) cannot be deducted. Any long distance charges related to your business can be, however.
- Equipment – You cannot use the Section 179 deduction if you have claimed depreciation on a piece of equipment in prior years. The depreciation must continue for that piece of equipment.
To learn about more non-deductibles click here.
Since 1994, Suzette Flemming, owner and CEO of Flemming Business Services has been assisting service corporations, e-commerce start-ups and non-profits in untangling their finances and providing clear financial direction.