Video:What are Business Tax Deductions?with Jennifer Damore
Business tax deductions can save you a lot of money if you know where to find them. Learn all about business tax deductions so you can save in this how-to video from About.com.See Transcript
Transcript:What are Business Tax Deductions?
Hi, I'm Jen D'Amore for About.com and this video is all about business tax deductions.
What are Tax Deductions?
Tax deductions are expenses incurred that are eligible to be subtracted from your income, thereby lowering your taxable income. They are usually related to money that is spent to produce additional income.
What are Business Tax Deductions?
There are also business deductions including the cost of goods sold, and business expenses. To qualify as a business expense the expense must be "ordinary and necessary" for your profession. For example, if you're a baker you can absolutely deduct the new mixer you've purchased for your business, but it wouldn't be "ordinary and necessary" to deduct the cost of a pet that keeps you company while you bake.
If you work from home and use your automobile for business purposes, not including commuting you can usually deduct a percentage of your home and auto expenses, but not one hundred percent of them since they're not solely used for business.
More on Business Tax Deductions
Receipts must be kept for any deductions and it's helpful to keep notes on anything you may feel is questionable. While all your meals can't be deducted as a business expense, taking a client out to dinner to try to get their business may be deductible, so note information about the meeting on the receipt.
Deductions lower your taxable income, and save you money, so it's worth it to know what deductions you are eligible to take.
Tax laws are always changing, and your personal circumstances may qualify you for more deductions than you realize, so of course you can always let a professional accountant prepare your taxes for you, and even their fee is completely deductible.
Thanks for watching. To learn more visit us on the web at About.com.