This is the time of the year when a lot of people start thinking about various ways on saving money on their year end taxes. IRS advises taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby -- an activity not engaged in for profit (hobby losses/expenses are not tax deductible). One question that I am asked repeatedly is can we save money on taxes by starting a business? so here is the summary of the main tax benefits of having a company.
The government realizes that it takes an investment to start and run a business and allows the self-employed to deduct any work-related expense from their gross income. This means anything from a box of paper clips to an expensive computer system is tax-deductible, if purchased (and used) for business purposes. This notion of business costs being tax-deductible is why people think that the self-employed never pay any taxes, and probably that’s the reason why people who starts a company almost always have more than one.
There are numerous costs of doing business that qualify as deductions. These include, but are not limited, to the following ten: