5 Unusual Tax Deductions for Small Businesses
NEW YORK ( TheStreet) -- For many small business owners, filing taxes can be a timely and excruciatingly painful experience.
Yes, everyone wants to get money back, but for sole proprietors and business owners taking on filing their taxes themselves, knowing what is and what isn't deductible for your business could be challenging, especially given the Internal Revenue Service's myriad and constantly changing rules and regulations.
Outright.com, an online accounting and bookkeeping service for e-commerce sellers owned by GoDaddy.com, provided TheStreet with a few unconventional, yet perfectly legal, business-related tax deductions.
1. A Guard DogPerhaps your business needs a legitimate guard dog. No. Really. The guard dog tax deduction applies to a pet who guards your company's property and inventory. If you have a dog you are perhaps a little afraid of yourself -- i.e. it is a breed that can inspire guard dog status (think sheep herders and bomb sniffers) -- and it guards your inventory, you can deduct the cost of keeping the pet, such as kennel fees, shots and other expenses. You can also depreciate it over its lifespan based on the figures given by the local breeder. However, you cannot deduct the cost of actually purchasing the dog. A key point to note is that the dog should be a necessary and regular need for your business, Outright says. If your dog goes to your warehouse with you once a week then it won't qualify. It needs to be guarding your inventory every day to make the cut.
2. Bad DebtIf you expect income from a certain business transaction but cannot collect it over a reasonable period of time, it would qualify as bad debt. A great example of this is if you invoiced someone for a product you sold, included the amount in your gross income, but never got paid. You can then deduct the money at fair market value or face value -- whichever is lower. You can also deduct bad debt for a previous business you closed. A point to note here is if you use cash-based accounting, you cannot use this deduction because the bad debt cannot be part of your income.
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