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Any amount of money that may be written-off while filing tax as expenses incurred during business is called business deduction. An individual may claim various expenses like office maintenance, electricity, purchase of stationary for business, purchase of property for business among others while filing his/her tax. Given below are some of the important questions about business deductions that are answered by the Experts.
An individual may claim business deductions on his/her home in the following circumstances:
The house is used as the principal place of business
The individual meets clients, patients or customers at his/her home for business purposes
If the part of the house that is used for business is not attached to the rest of the individual’s house.
In most situations, an individual’s rent may not be exempted from their taxable income. If the individual uses the apartment for business purposes or as an office, then the individual may claim business deduction on the rent.
If the owner of the organization is also an employee of the non-profit organization, then he/she may claim deduction on the business use of his/her house on Schedule A. He/she may qualify for these deductions only if he/she earns an income from the organization.
In most situations, an individual may be able to claim tax deductions on the purchase of a boat in the coastal city where he/she conducts his/her business if he/she uses the boat or any part of it for his/her business. He/she may also claim deductions on it if the maintenance of the boat is a part of the business.
An ordinary business expense is an expense that a person may commonly incur in their trade whereas a necessary expense is one that is required and important for the business or trade.
An individual may not be required to be registered as a DBA for claiming business expenses on their tax returns. The individual may be considered to be a sole proprietor if they are not registered as a DBA. He/she may deduct the expenses in the same way as any other corporation by reporting his/her earnings and expenses on Schedule C of the federal tax return form. The individual may be taxed on the basis of his/her net earnings after all the expenses have been deducted.
An individual may find information about the possible business deductions on the following link: http://www.business.gov/finance/taxes/business-income/tax-deductions.html
An individual may be required to provide documentation like receipts, credit card statements or cancelled checks to prove that the individual incurred the expenses for their business in order to claim the deductions. The individual may also have to show these documents if there is an audit of their tax returns. If the individual does not provide enough proof during the audit, their claim may be cancelled and they may have to pay tax, penalty and interest for faulty claims.
Most people who own businesses may be eligible for expense deductions. However, they may have to fulfill certain conditions to qualify for these deductions. You need to be aware of these rules and conditions so that you do not claim the expenses wrongly and get charged for fraudulent activity. You may receive the answers from an Expert if you have any questions or need more information about business deductions.