Business Expenses Deductible for Income Tax Purposes

In order to maximize your business deductions and minimize the tax you must pay-either directly from the business or due to flow-through income reportable on your personal tax return familiarize yourself with the following deductions. Remember, each Money not paid in tax is extra Money that may be taken out as profits. <br />Small business owners struggle every year with what deductions they can take on their income taxes. If a business is a sole proprietorship, then the owner is usually served best by deducting most business expenses on federal tax Schedule C. Some business owners use federal tax Schedule A. Owners of sole proprietorships usually get more mileage and bang for their buck out of Schedule C. <br />Cost of goods sold <br />The first expense a small business must consider is cost of goods sold. This expense is only applicable if the business sells a product that it manufactures. If the business sells a service, chances are the cost of goods sold line on Schedule C will be left blank since it deals with inventory. In order to value inventory, determine its value at both the beginning and end of the accounting period. The cost of the raw materials to manufacture the inventory plus any freight to ship the raw materials and any storage is included in the cost.