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Tax Deductions

The IRS starts with the premise that all the money you receive is taxable -- with some specific exceptions. For small business owners there is a long list of allowed exceptions that can be deducted to reduce your gross income to a lower income number from which your tax will be computed.

Beyond the published list, there is even greater latitude for more deductions. But, in order to be allowed, each deduction must meet the basic IRS requirement -- it must be “ordinary, necessary and reasonable” for your type and size of business.

That means whatever you purchased must clearly be needed by your business and not be extravagant considering what’s appropriate for the way your business needs to use it.

As tax guru Jan Zobel explains: "Ordinary means that someone else who has a business like yours would likely have a similar expense. Necessary means that you needed to spend this money in order to operate your business. In general, business expenses are deductible if they are costs you wouldn't have had if you didn't have your business. In other words, if you would have had this expense -- even if you didn't have your business -- it's probably not deductible."

In this tax deductions subsection

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