There is some good news for business owners looking for more tax breaks this year. Due to the current state of the economy, the government has extended many tax breaks to business owners to try and stimulate the economy.
Section 179 Business Expense (Equipment Expense) Deduction
The amount of equipment that can be deducted for business is $500,000. It was previously $250,000.
New Tax Break For Business Owners
The Make Work Pay tax credit could be worth up to $400 for individual workers who earn between $75,000 and $95,000. The Make Work Pay tax credit is worth up to $800 for married couples who earn between $150,000 and $190,000.
Here's the good news for a sole propritor. If you are the sole employee, you may be eligible for the tax credit. If you're not famililar with the difference between a credit and a deduction, you'll like the credit better. A tax credit can be written straight off of your tax liability dollar for dollar.
Independent Contract Work
What some independent contractors might not understand is what total to claim as actual profit. You do have to report income earned based on the 1099 tax form. If you sent a client an invoice for $10,000 and $2,000 was spent on purchasing supplies for that client, then the income taxed would be $8,000. If you forget about subtracting your expenses, then you've just increased your tax liability and you don't want to do that.
Business Mileage Reimbursement
The mileage rate for businesses is 50 cents per business mile driven. You have the choice of taking the standard mileage deduction or the actual vehicle expenses deduction. Take a look at both and determine which will give your business the better tax deduction. How many business miles driven for business purposes will most likely determine your choice.
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