“Other” business expenses is the generic term you see on your tax form. Just what are the other expenses you can legitimately deduct? Read more.

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What “other” business expenses are deductible? The generic term you see on your tax form may leave you scratching your head. Just what other expenses can you legitimately deduct?

While there’s no hard and fast rule, examples include insurance premiums, legal and professional fees, supplies you use in your business, utilities, auto expenses, and the deduction for certain energy-efficient commercial building property.

Here’s a guide for less obvious items.

* Like all costs you incur in your business, “other” expenses must be ordinary and necessary in order to be deductible.  In tax law, “ordinary” means normal, usual, or customary in the context of your business.

For example, if you’re a commercial fisherman, boat insurance is an ordinary expense. Other business owners may have a harder time justifying a deduction for boat expenses.

* An expense is necessary if it is appropriate and helpful to the operation of your business.

* Some expenses are only partially deductible. For instance, the cost of meals and entertainment must have a direct business purpose before you can claim a deduction. Even then, your deduction is generally limited to 50% of your cost.

* Certain expenses are specifically identified as nondeductible. Personal, living, or family expenses fit into this category, as do fines, penalties, political contributions, commuting to and from your job, and most lobbying costs.

Contact us any time you have a question about the deductibility of a business expense. We’ll help you get the greatest tax benefit.

Enjoy tax-free income this summer

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If you are going to be out of town this summer, consider renting your home while you’re gone. The IRS allows you to receive up to 14 days of rental income per year completely tax-free.

Summer is a good time to do business entertaining. Keep records of the cost, the date, the attendees, and the business purpose. Your tax deduction is limited to 50% of the cost.

Summertime is a good time to take care of the tax and financial tasks you’ve been putting off – planning for college, retirement, and your estate, for example. For assistance, give us a call.

 

 

Don’t overlook this deduction

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The option of deducting state and local sales taxes in lieu of deducting state and local income taxes is still available for 2011. The sales tax deduction may be based on amounts in an IRS table, plus actual amounts paid for certain big-ticket items like cars. Or you can take the deduction based on actual receipts for sales taxes paid in 2011.

IRS raises mileage rates effective July 1, 2011

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The IRS announced an increase in the standard mileage rates for computing the deductible costs of operating a car for business or for medical or moving purposes. The new rates will apply to driving from July 1, 2011, through December 31, 2011. The revised rates are 55.5 cents per mile for business driving and 23.5 cents for medical and moving driving. The rate for charitable driving is fixed by law and remains at 14 cents per mile.