Have This in Mind When Filling your Property Allowance Claim
If you are like most small business owners, you are probably in the process of filing your taxes, right? Most people say the process can be very daunting especially when it comes to navigating the complexities of the tax forms. While most people prefer filing for themselves to help save on cost, making wrong entries can be very costly in the long run. Here are the ins and outs of small business tax information that you ought to be aware of to ensure you are doing the right thing. First things first, what is a tax deduction and how does it help you? In simple terms, a tax deduction will lower your total income that is meant for taxation. Simply put, once your tax liability is significantly reduced, it means the tax liability also reduces hence you end up paying much less. While at it, you will discover that some people don’t necessarily have to have documentation or show proof of income. But then again, remember documentation and itemization of all your small business records and details can save you a lot of cash in the end.
On the flip side of the coin there is tax credit whereby it chops off an amount from what you owe the IRS. What this means is that while tax deductions reduces the amount you owe the IRS albeit indirectly, a tax credit gives you a dollar for each dollar qualified for during the tax deduction.
Now that you have set the record straight, you might want to learn more about the options at your disposal to ensure you are doing the right thing. There is what is known as start-up deductions whereby the IRS allows you to a deduction of up to $5000 for all the expenses you have incurred. Keep in mind the $5000 tax deduction is applicable to start-up expenses that fall below $50,000. In this case, such things as cost of business cards, cost of equipment and cost of supplies will qualify for the tax deduction as long as they are below $50,000.
There is also the issue of property allowance claim you have to be aware of whereby you use rent as a tax deduction. Did you know the room or building you rent as your business premise will qualify you to a property allowance claim and reduce your taxable income even further? Remember, the property allowance claim is still applicable even if your small business is located at home. You can always find a website with detailed information on small business taxes so you can make an informed choice.