Small-business tax rule No. 1: Don't mess with the IRS.

But that doesn't mean you should cheat yourself. Take every legal deduction you can. Here are a dozen that even savvy small-business owners and entrepreneurs sometimes forget:

The deductible dozen:

1. Home office 7. Travel, meals, entertainment and gifts 2. Office supplies 8. Insurance premiums 3. Furniture 9. Retirement contribution 4. Other equipment 10. Social Security 5. Software and subscriptions 11. Telephone charges 6. Mileage 12. Child labor

1. Home office
Concerned that claiming a home-office deduction is tantamount to sending an engraved invitation to an Internal Revenue Service auditor? Don't be, says Jan Zobel, author of "Minding Her Own Business: The Self-Employed Woman's Guide to Taxes and Recordkeeping."

"I don't agree that chances of getting audited are greater with a home-office deduction," says Zobel, a San Francisco Bay-area tax expert, who specializes in serving the self-employed. The key is that you use the term "home office" the same way the IRS does. The tax agency says it must be a space devoted to your business and absolutely nothing else. Deducting the den that houses the family computer and serves as a guest bedroom won't fly with Uncle Sam.

"If you only have one computer and you have a child over four, the IRS is going to be pretty certain that the child is using the computer," says Zobel. "And the burden of proof is on you."

The deduction, however, isn't limited to a full room. Your home office can be part of a room. Just how much of the space is deductible? Measure your work area and divide by the square footage of your home. That percentage is the fraction of your home-related business expenses -- rent, mortgage, insurance, electricity, etc.-- that you can claim.

2. Office supplies
Even if you don't take the home-office deduction, you can deduct the business supplies you buy. Hang onto those receipts, because these expenditures will offset your taxable business income.

3. Furniture
When your office supplies are more than just pens and paper, you have another tax-cutting opportunity.

Office-furniture acquisitions provide a couple of choices. Deduct 100 percent of the cost in the year of the purchase or deduct a portion of the expense over seven years, also known as depreciation.

To take the whole cost in one tax year you'll use the Section 179 deduction (named for the part of the tax code where the law appears). Recent tax-law changes have made this deduction even more attractive. For the 2007 tax year, a business owner can expense up to $125,000. The news is even better for the 2008 tax year. The economic stimulus bill enacted in February increased the Section 179 amount for this tax year to $250,000.

If you choose instead to depreciate the desks and filing cabinets, you can't simply split the cost into equal portions over the depreciation period. Instead, you must use an IRS chart to make separate calculations each year.