Robert J. Fedor, Esq., L.L.C.

Small business owners and tax deductions: part 2

According to the U.S. Small Business Administration, more than 50 percent of all small business owners operate out of a home office. In our last blog post we discussed some home office-related tax deductions for small business owners. In this post, we'll continue to look at other types of tax deductions that small business owners may be able to take advantage of.

Business owners who have a bored teenager who is looking to earn some extra money this summer may be able to benefit both personally and financially. Hiring one's own child may not only keep a teen out of trouble, but also allow him or her to avoid paying income tax while mom or dad is able write off the child's salary as a business expense. Additionally, once an official employee, a child can open a Roth IRA and start saving for the future.

In addition to helping a child establish and grow an investment account for future use, a small business owner would also be wise to take steps to save for their eventual retirement. Contributions made to fund one's own retirement are tax-deductible. Likewise, in cases where a spouse does not work or is an employee of the small business, any health care costs paid towards insurance premiums are deductible.

In some cases, a small business owner may be required to travel for business. In cases where an individual uses a motor vehicle to visit clients or drive to business-related meetings, he or she can deduct certain expenses. For example, a small business owner who works out of a home office and travels to meet a client two hours away can deduct the mileage associated with the trip as well as gas costs and a portion of expenses related to insuring and maintaining a personal vehicle.

If a business meeting necessitate air travel, the total cost of an airline ticket as well as a rental car and taxi are tax deductible. Costs related to a hotel stay are also 100 percent deductible, while the costs of meals are 50 percent deductible.

As with most tax and IRS matters, there are often detailed regulations and restrictions associated with each of the deductions mentioned above. It's wise, therefore, that small business owners take the time to understand what deductions are allowed and under what circumstances or risk the possibility of facing charges related to tax crimes.

Source: Fox Business, "A Dozen Deductions for Your Small Business," Dana Dratch, March 17, 2014

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