Business Deductions

Once you know what your gross profit is for the year, based on your business income minus any cost of goods sold, it's time to figure out how you can whittle that profit figure down for tax purposes by subtracting all your deductible business expenses.

Digging up every legitimate deduction you have is usually your best bet for reducing your taxable income, and therefore your tax bill, as much as possible in the short run.

In the long run, there may be other ways to save even more tax dollars - such as by shifting income to other tax years and by taking advantage of tax credits - that can take a certain amount of advance planning. But for many small businesses the deduction rules are often the best place to look for tax savings.

Then, we'll be ready to get into the details of the special rules that apply to some commonly encountered business deductions: