Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with the some key deductions that may reduce your tax bill for 2004.

Small-business consultants generally recommend that you hire an accountant to prepare your tax returns, payroll and financial statements. But you should also meet with your accountant well before the year-end rush to discuss such matters as tax planning, and record keeping for tax deductions.

Seven common small business tax deductions:

1. Employee Benefit Plans - You may deduct contributions to employee benefit plans (such as health insurance plans and retirement plans). Depending on your circumstances the maximum contribution that you may deduct per employee in a qualified retirement plan can go up to:

$100,000 or more For a Defined Benefit Plan
$44,000 For a 401(k) plan
$41,000 For a SEP-IRA or Keogh

2. Automobile Expenses? You can elect to deduct the actual expenses incurred (including gas, oil, tires, repairs, insurance, depreciation, and rent or lease payments) for the business-related portion of your car or truck expenses, or simply take the 2004 standard mileage rate of 37.5 cents per business mile.

3. Taxes - You may deduct Social Security and Medicaid taxes paid to match required withholdings on employee wages, federal unemployment taxes, sales taxes and real estate or personal property taxes paid on business assets.

4. Home Office - Depending on whether you use your home or other real estate for business purposes, you may deduct some or all of any mortgage interest paid, as well as some or all of the maintenance and repair expenses associated with the property. The cost of utilities and business supplies associated with business use are also deductible.

5. Depreciation ? Depreciation may be taken on passenger cars, equipment used for entertainment or recreational purposes (i.e., photographic equipment, cell phones and computers), as long as these items are used solely for the business.

6. Professional Fees - You may deduct professional fees, such as those paid to a lawyer or accountant.

7. Meals and Entertainment - You may deduct 50 percent of meal and entertainment expenses directly associated with the conduct of your business Remember to keep on file the records and documentation necessary to substantiate all of your deductions.

Daniel Lamaute, of Lamaute Capital, Inc. specializes in setting up retirement plans for small business owners. http://www.InvestSafe.com

In The News:

Too many taxes  The Indian Express

Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

1031 Exchange Rules and Requirements

Following is a reproduction of the IRS's rules and requirements... Read More

Small Business Tax Issues for Self-Employed Individuals

The United States is a nation of entrepreneurs. There are... Read More

How Likely Are You To Be Audited?

Statistics for IndividualsUnfortunately, the IRS increased its rate of auditing... Read More

Six Urban Myths About Taxation

Six Urban Myths ? Taxation"I am proud to be paying... Read More

Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000

Does your incorporated business pay alternative minimum tax ["AMT]? If... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

Tax Trap #5 -- Ignoring The IRS (and the 5 best ways to contact them!)

We all love to criticize the IRS, don't we? And... Read More

Tax Reduction Tips

In the rush to get tax returns prepared and filed... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

Send Your Kids To Summer Camp and Write It Off

If you paid someone to care for a child so... Read More

Tax Secrets - How Drew Miles Helped Me

How about a Tax Tip?As we all know Taxes are... Read More

Small Businesses Filing Amended Federal Tax Returns to Recover Money

Small Businesses Filing Amended Federal Tax Returns to... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters

The IRS has obtained civil injunctions against more than 100... Read More

Estate Taxes - It Pays to Plan Ahead

Estate taxes. It's not enough to simply know they exist,... Read More

How to Maximize Your Home Business Tax Deductions for 2005

Someone once said, 'the best way to calculate your taxes... Read More

Rental Property Tax Deductions

Own residential rental properties? This article discusses how income from... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

Tax Trap #1 -- Waiting to Incorporate: What A Difference A Date Can Make

NOTE: This is the first in a series of 5... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More