Hoping to find a way to lower your tax bill? Why not get Uncle Sam as your partner? With him beside you, you can take advantage of several tax breaks that can help you make it through the hard times. If you are a small business owner or a small business that earns $7 million to $25 million yearly, you may use these tax breaks. These tax breaks have been with us for years while others are new due to the Small Business Jobs Act that took effect last year.
So where do you start? First, make full use of Section 179, a deduction option in which you can deduct certain business expenses in the year they were made instead of depreciating the costs for a number of years. With the Small Business Jobs Act of 2010, up to $500,000 in business expenses can be written off under this section for 2010 and 2011. This large amount is big enough so small business owners can write off their assets and equipment purchases in the year they bought them.
For expenses you depreciate, the Small Business Jobs Act has retained the 50 percent bonus depreciation provision. This is a bonus tax break that applies to your maximum Section 179 expenses. After taking the full $500,000 expending claim, small business owners can still take off an extra 50 percent of the adjusted basis of certain depreciable business property purchased and used in 2010.
You can also reduce health care costs. If you are self-employed, you can deduct the total cost of health insurance premiums to minimize your taxable income. For 2010, that health coverage cost can help lower self-employment taxes. The health care costs go to Form 1040 where they are deducted from the gross income for a lower, adjusted gross income amount from which taxes are based. Now those medical insurance costs are taken from the self-employment income on Schedule SE. Self-employed taxpayers use this form to calculate Federal Insurance Contributions Act taxes that end up in Social Security and Medicare. Since the self-employment tax is 15.3 percent (12.4 percent for Social Security on earnings up to $106,800 and 2.9 percent on all income for Medicare), you can get a 15 percent savings on the premiums.
Last but not the least are cell phones. While these are important business tools, they rake up a lot of taxes. Initially, the Internal Revenue Service categorized them as listed property and business deductions were limited or disallowed unless the taxpayer could substantiate their business use and purpose. Again, thanks to the Small Business Jobs Act, cell phones and similar communications devices have been de-listed. This removes the requirement that phone users should keep detailed logs of business and personal use.
So where do you start? First, make full use of Section 179, a deduction option in which you can deduct certain business expenses in the year they were made instead of depreciating the costs for a number of years. With the Small Business Jobs Act of 2010, up to $500,000 in business expenses can be written off under this section for 2010 and 2011. This large amount is big enough so small business owners can write off their assets and equipment purchases in the year they bought them.
For expenses you depreciate, the Small Business Jobs Act has retained the 50 percent bonus depreciation provision. This is a bonus tax break that applies to your maximum Section 179 expenses. After taking the full $500,000 expending claim, small business owners can still take off an extra 50 percent of the adjusted basis of certain depreciable business property purchased and used in 2010.
You can also reduce health care costs. If you are self-employed, you can deduct the total cost of health insurance premiums to minimize your taxable income. For 2010, that health coverage cost can help lower self-employment taxes. The health care costs go to Form 1040 where they are deducted from the gross income for a lower, adjusted gross income amount from which taxes are based. Now those medical insurance costs are taken from the self-employment income on Schedule SE. Self-employed taxpayers use this form to calculate Federal Insurance Contributions Act taxes that end up in Social Security and Medicare. Since the self-employment tax is 15.3 percent (12.4 percent for Social Security on earnings up to $106,800 and 2.9 percent on all income for Medicare), you can get a 15 percent savings on the premiums.
Last but not the least are cell phones. While these are important business tools, they rake up a lot of taxes. Initially, the Internal Revenue Service categorized them as listed property and business deductions were limited or disallowed unless the taxpayer could substantiate their business use and purpose. Again, thanks to the Small Business Jobs Act, cell phones and similar communications devices have been de-listed. This removes the requirement that phone users should keep detailed logs of business and personal use.
About the Author:
If you are facing an IRS audit or have other tax problems, contact the experts at Guardian Tax Resolutions today by visiting GuardianTaxResolutions.com for a free consultation and quote.