Business Tax Deduction Cheat Sheet – The Woodlands CPA Firm
Evans Sternau CPA is a The Woodlands CPA Firm that provides tax planning services to help you navigate the complexities of operating a business.
Evans Sternau is a The Woodlands CPA firm that provides proactive tax, accounting, and advisory services for business owners, entrepreneurs, and individuals with complex tax challenges. Evans Sternau CPA can provide you guidance so that you can be certain that you are accurately filing your tax return and utilizing all deductions available to you.
An individual, corporation, partnership, trust, or estate may generally deduct ordinary and necessary expenses incurred during the operation of their business. In general, if the expense incurred is for a property that is both business and personal, the expense needs to be allocated between business (tax deductible) and personal (typically nondeductible).
Business Start Up Expenses
When an entrepreneur or small business owner decide to open their own business, they typically incur numerous expenses before the business is fully operational. An entrepreneur or small business owner is entitled to elect to expense up to $5,000 of its start-up costs. The balance of any remaining start-up costs is amortized monthly over a 15-year period.
Business Deduction for Employment Taxes
When a business hires, the new hires are classified as either employees or independent contractors. Regardless of whether the new hire is classified as an employee or an independent contractor, payroll taxes are owed the compensation paid to the new hire. The distinction between the two is as follows, if the new hire is an employee, the business and employee each share in the cost of the payroll taxes. If the new hire is an independent contractor, the new hire is responsible for the entirety of the payroll taxes.
The employers share of payroll taxes paid on behalf of an employee are tax deductible.
Business Deduction for Interest Expenses
When a business is looking for capital to expand its operations, the capital either comes from investors who provide capital in exchange for ownership of the company, or the company borrows money from a lending source.
If the company borrows money, interest expense will be incurred. The interest expense paid by the company is a deductible business expense.
If you operate a medium or large business (generally a business with more than $27 million of annual revenue), there are certain tax rules that may prevent you from deducting the entire amount of interest expense. By working with a proactive tax advisor at Evans Sternau CPA The Woodlands, we can help you plan and maximize your deductions.
Business Travel Expenses
A business may deduct ordinary and necessary expenses incurred while traveling away from their home or business. Appropriately determining the deductibility of these business travel expenses can be difficult. Evans Sternau CPA can help you navigate the complex tax rules of determining the deductibility of business travel expenses.
Qualified Business Income Deduction 199A QBI
Individuals, trusts, and estates with income from partnerships, S corporations, single member LLC’s, and sole proprietorships are generally entitled to a 20% tax deduction of the profit from their business. The 199A QBI calculation is extremely complicated but can provide significant value to those that work with a proactive tax advisor at Evans Sternau CPA The Woodlands.
For higher income earners, the 199A tax deduction is subject to phase-out and requires the business to have W-2 wages or considerable depreciable assets in order to qualify for the deduction.
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Evans Sternau CPA provides proactive tax, accounting, and advisory services for business owners, entrepreneurs and individuals with complex tax challenges. Evans Sternau CPA is for those that want year round support, not just during tax season.
