| What is the most frequently asked tax question? Are | | | | you sell a product. |
| you ready? Here it is: "What's deductible?" | | | | Now let's move on to Part II. Take a good look at |
| That's it. Without a doubt, it's the most common tax | | | | Lines 8-27. This section of Schedule C is a literal |
| question I receive every year. It comes in several | | | | goldmine of deductions in alphabetical order. Here they |
| forms, such as: | | | | are, with the corresponding Schedule C line number: |
| -How do I identify all the deductions I'm allowed to | | | | 8-Advertising |
| take? | | | | 9-Car and truck expenses |
| -Is there anything deductible that I'm not deducting? | | | | 10-Commissions and fees |
| -How do I make sure I'm taking all legal deductions? | | | | 11-Contract labor |
| -Is there one resource that describes all legitimate | | | | 12-Depletion (OK, there's a rare one) |
| deductions, A to Z? | | | | 13-Depreciation and Section 179 deduction |
| Knowing all allowable small business tax deductions is | | | | 14-Employee benefit programs |
| no easy task. Our beloved politicians have done much | | | | 15-Insurance |
| to complicate our lives in this regard. | | | | 16-Interest |
| Any long journey begins with a single step, so here's | | | | 17-Legal and professional services |
| where you can start learning what's deductible: your | | | | 18-Office expense |
| income tax return. Go to the IRS website right now | | | | 19-Pension and profit-sharing plans (OK, another rare |
| and print out a copy of Schedule C and take a close | | | | one) |
| look. Here you'll find a list of about twenty deductible | | | | 20-Rent or lease |
| business expenses. | | | | 21-Repairs and maintenance |
| To get a current copy of the 2008 Schedule C, go to | | | | 22-Supplies |
| the IRS website and click on "More Forms and | | | | 23-Taxes and licenses |
| Publications". | | | | 24a-Travel |
| Schedule C is divided into 5 sections (Parts I-V). Part I | | | | 24b-Meals and entertainment |
| is labeled "Income" and Part II is labeled "Expenses", so | | | | 25-Utilities |
| you would think the best place to start is Part II, right? | | | | 26-Wages (if you have employees) |
| Well, if you don't sell a product, you are correct. But if | | | | 27-Other expenses |
| you do sell a product, take a close look at Part I | | | | Take special note of that last expense, Line 27, "Other |
| because this is where you deduct what's known as | | | | expenses". That's my favorite! This is where you can |
| "Cost of Goods Sold" on Line 4. | | | | deduct any other legitimate business expense that's |
| For retailers, this is probably your largest expense. You | | | | not included on the other lines. In fact, Part V is |
| get to deduct your wholesale cost of all products sold | | | | devoted exclusively to this "Other Expense" category, |
| during the year. Part III of Schedule C (Lines 33 through | | | | and the IRS allows you to have any number of |
| 42) contains the details of how this expense is | | | | business expenses listed here, which are added |
| calculated, and the amount from Line 42 is transferred | | | | together on Line 48 and then transferred back to Line |
| back to Line 4. | | | | 27. |
| So that's your first and potentially biggest deduction, if | | | | |