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.
3. Legal Fees for Illegal ActivityIf you ever hired a legal defense lawyer for a criminal proceeding against yourself as a business person, the legal fees are tax deductible regardless of the lawsuit's outcome. It is important to note that the rules for personal lawsuits, such as divorce are different. However, if you embezzle money from your own business and need a lawyer to represent you, deduct away!
4. Donate inventoryUnsold or unused inventory is a cost to you. Instead of spending money on storing inventory or taking a complete loss, donate it and get a tax deduction. Keep in mind though, donations above $500 have more rigorous reporting rules.
5. Hire Your Kids and SpouseIf you pay a minor child up to approximately $6,000 annually from your profit for helping you with business-related tasks, that amount is not taxed at the same rate as income. Also, if you hire your spouse, then as an employer you can pay for the health care of your spouse's family, i.e., yours! Health care benefits expenses are also tax deductible. -- Written by Laurie Kulikowski in New York. Follow @LKulikowski To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com. >To submit a news tip, email: firstname.lastname@example.org.
Twitter and become a fan on Facebook.