A dozen deductions for your small business
5. Software and subscriptions
The recently increased Section 179 provides another tax break in this area of business expenses. Previously, a company had to depreciate the cost of computer software over three years. Now, off-the-shelf software a business buys can be fully expensed in the year purchased. This option, however, is only good for the 2013 tax year unless Congress renews it for the 2014 tax year and beyond.
The rules for deducting business and industry-related magazine subscriptions weren't changed. You can continue to take the total costs as a full deduction in the year spent.
If you drive for business, the IRS wants to give you some of your money back. But Uncle Sam loves documentation, so keep a notebook in your vehicle to record the date, mileage, tolls, parking costs and the purpose of your trip.
At the end of the year, you have two choices. You can total the mileage and add in the tolls and parking to calculate your deduction. Once you have your mileage total, multiply it by 56.5 cents for your 2013 deduction. For 2014 business tax purposes, the rate drops to 56 cents a mile.
Or you can measure your business usage against your personal driving and deduct that portion of your auto-related expenses, says Zobel. Remember to include gas, repairs and insurance.
If you are leasing, include those payments. If you are buying the car, factor in the interest on your loan and depreciation on your vehicle.
And if your company's office is at your house, you get a bit more of a break. You can deduct the entire business-related mileage, from the minute you pull out of the driveway until you return home, says Gary W. Carter, CPA and author of "J.K. Lasser's Taxes Made Easy for Your Home-Based Business: The Ultimate Tax Handbook for the Self-employed."
If your business is not home-based, your mileage meter starts at your first business-related destination and ends at your last. You can't include the drive to and from home, says Carter. In this case, try to schedule several business appointments on the same day to allow you to take the mileage between stops as a tax write-off.
7. Travel, meals, entertainment and gifts
Good news, small-business travelers. You might as well stay in a nice hotel, because the entire cost is tax deductible. Likewise, the cost of travel -- air, rail or auto -- is 100 percent deductible, as are costs associated with life on the road (dry cleaning, rental cars and tipping the bellboy).
The only exception is eating out. You can deduct only 50 percent of your meals while traveling. So stay at the Ritz and eat at Wendy's.
Once you get home, your on-the-job meals aren't deductible -- unless you bring along a client to talk business. In this case, you might consider splurging on a fancier meal because then you can write off half such work-related dining costs.
The 50 percent deduction limit applies to most other client entertainment expenses, too. But a direct gift to a client or employee is 100 percent deductible, says Zobel, up to $25 per person per year.