Introduction
Few of us ever test our powers of deduction, except when filling out an income tax form.
—Laurence J. Peter
If you are truly serious about preparing your child for the future, don’t teach him to subtract—teach him to deduct.
—Fran Lebowitz
The goal of this book is to help you, the small business owner, pay less federal tax so you can keep more of your hard-earned dollars. The trick to paying lower taxes is to take advantage of every tax deduction available to you. A potentially huge array of deductions is available to businesses of all sizes, but you need to know they exist and understand how to use them.
Remember, the IRS will never complain if you don’t take all the deductions you are entitled to. In fact, the majority of small businesses miss out on many deductions every year simply because they don’t know about them—or because they neglect to keep the records necessary to back them up.
That’s where this book comes in. We explain all the most valuable business deductions and show you how to deduct all or most of your business expenses. Learn how to take and properly document your travel, home office, and operating expenses, depreciation, and other deductions. Even if you work with an accountant or another tax professional, you need to understand business deductions. With this book, you will learn how to keep better records, ask better questions, obtain better advice and—just as important—evaluate any information you get from tax professionals, websites, and other sources. If you do your taxes yourself, your need for knowledge is even greater. This book can be your guide—providing you with practical advice and information you need to rest assured that you are not missing out on valuable deductions.
Now more than ever, you’ll need guidance when it comes to understanding your taxes. The Tax Cuts and Jobs Act—the most sweeping change to the tax code in over 30 years—went into effect starting in 2018. We explain the new tax law and how it affects small business deductions including:
- new individual and corporate tax rates (see Chapter 1)
- the new 20% tax deduction for pass-through business owners (see Chapter 10)
- changes to bonus depreciation and Section 179 expensing, including substantial increases in the annual limits (see Chapter 5)
- changes to the annual depreciation deductions allowed for passenger automobiles (see Chapter 8)
- the elimination of deductions for business-related entertainment and certain meals (see Chapter 14)
- new limits on deducting business losses (see Chapter 1)
- new limits on deducting interest for larger businesses (see Chapter 14), and
- changes affecting the cash method of accounting and deducting inventories (see Chapters 6 and 14).
This book is for anyone who owns a business, including self-employed businesspeople; sole proprietors; professionals who own their own practices; those engaged in part-time or sideline businesses; consultants, freelancers, and independent contractors; owner-employees of small corporations; partners in business partnerships; and members of limited liability companies. If you are an employee of a business you do not own, this book does not cover your situation. Nor is this book a tax preparation guide—it does not show you how to fill out your tax forms.
By the time you do your taxes, it may be too late to take deductions you could have claimed if you had planned the prior year’s business spending wisely and kept proper records. To avoid this sad (and expensive) fate, you can (and should) use this book all year long to make April 15 as painless as possible.
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