Tax Tips: Don’t Miss Out on These Write-Offs

By PlanetLaundry staff | Mar 17, 2010

Whether you’re headed to an accountant to file your taxes – as 88 percent of small-business employers are – or plan to complete them yourself, don’t forget these commonly ignored deductions, according to Will Fernandez, a partner at Citrin Cooperman & Co., LLP, an accounting firm based in New York City.

1. If your business posted a loss in 2009, you can carry back those losses five years – instead of the normally allotted two years – allowing you to offset current losses against previous taxable income. This provision was first implemented for the 2008 tax year and was extended to include 2009. That means you’ll get a bigger tax return when you need it most – now.

2. Tax laws don’t allow you to deduct medical insurance expenses on your business taxes, but if you’re the owner of an S-Corporation or a limited liability company, you can deduct your health insurance on your personal taxes – even if the policy is offered through your company, and not purchased separately on the open market.

3. Did you purchase new or used equipment last year? You’re allowed to write off up to $250,000 of those assets, as long as your company posted a profit. Additionally, you can deduct 50 percent of the depreciation on new assets, while spacing out the remaining 50 percent over the rest of the asset’s useful life.

4. If you’re one of the 39 percent of small-business owners who use personal credit cards for business expenses, don’t forget to count the interest incurred as one of your business deductions. That goes for any interest expense used for the business – for example, interested accrued from funds taken out of a home equity line of credit. But be certain you can prove the funds were used to cover business expenses with transfer receipts.

5. Typically, you’re only allowed to deduct 50 percent of business entertainment expenses. But events like year-end holiday parties and summer employee picnics can be taken at 100 percent deductions. This is seen more as “employee retention.” However, if you invited spouses and kids, perhaps think twice about taking the full deduction. The bottom line for all of these deductions is to stay as honest as possible.