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Home Business Tax Deductions

Business owners get to hide money from Uncle Sam…legally!

The U.S. Government loves business owners who fuel the economy and create jobs. As a reward the tax man treats business owners more favorably than lowly employees (aka “sellouts”). One great advantage to being your own man (or woman) is that you have many more tax deductions than the cubicle dwelling automatons.

Tax deductions are subtracted from your Gross Income to determine your Taxable Income. If you make $50,000 and have a $5,000 tax deduction, that does not mean that you are getting $5,000 more on your tax refund, it means that your $5,000 will be deducted from your Gross Income and you will only be Taxed on $45,000 instead of being taxed on $50,000. The lower your taxable income, the less tax you will have to pay. Businesses pay taxes only on their profits.

Keep Records…Seriously

If you get audited you will have to justify every deduction you take. If you can’t justify your deductions Uncle Sam will punish you (back taxes, interest, penalties).

Maximize Your Deductions…to decrease your taxable income

Business Owners can deduct 4 categories of business expenses

1)   Start Up Expenses

Start up expenses are expenses incurred to get your business up and going (advertising costs, incorporation fees, purchasing office supplies, accounting fees). You can not deduct these all in the year in which you incur them, but you may be able to deduct them in equal amounts over your first 60 months in business.

2)   Capital Expenses

When you buy something for your business that has a useful life of more than 1 year it is called a capital asset (vehicles, office furniture, equipment, fax machine, a house, a building, tools, etc.) Capital expenses are considered investing in your business.

Large capital expenses are depreciated over time (deducting only a portion of the cost in each year of the item’s useful life). In other words, these expenses are capitalized and depreciated. The IRS publishes depreciation schedules defining an asset's useful life and each year’s deduction. Section 179 of the Internal Revenue Code allows certain smaller capital expenses to be deducted as an expense (deduct the entire cost just like an operating expense) rather than being capitalized and depreciated. Most home business capital expenses will probably be small enough to be deducted as an expense instead of capitalized and depreciated. THIS MEANS YOU GET YOUR MONEY BACK FASTER!

Ordinary repairs and maintenance on your capital assets can be deducted as an expense. But if a repair or replacement increases the value of your property, increases its useful life, or makes it more useful, then you must treat that expense as a capital expense. In other words, ordinary repairs and maintenance on your capital asset can be deducted as an expense, but IMPROVEMENTS to your capital asset must be capitalized and depreciated over time.

3)   Operating Expenses

These are the day to day cost of doing business. Paying your light bill, renting your office space, putting gas in your business vehicle, paying your employees, travel expenses, ordinary repairs and maintenance, paying your internet bill, etc.) These expenses can be fully deducted in the year you incurred them.

Operating expenses differ from capital expenses that are depreciated over time because if you have a $50,000 business gas bill, you deduct the ENTIRE $50,000 that year, but if you purchase a $50,000 office building you are only allowed to deduct a PORTION of that expense each year (this is what is meant by depreciating over time).

4)   Inventory Expenses

Just about anything you make or buy in order to resell to your customers is considered inventory. Inventory costs are deducted as you sell the inventory. If you purchase $500,000 worth of widgets in 2010, but only sell $100,000 worth of widgets in 2010, then you only get to deduct the $100,000. The unsold inventory (remaining $400,000 worth of widgets) becomes a business asset at the end of 2010.

What This Means To A Business Owner Is…

You get to keep more of your money! You should be taking advantage of every deduction the law allows! Always consult a tax professional!

How To Get Divorced In Texas

Two people get dressed up in front of all their friends and family, look each other in the eye and say, "I do forever and ever and ever." Sometimes these marriages last forever. Sometimes forever isn't as long as any of us thought it would be. There are reports that 50% of all marriages in America end in divorce and there is a growing bit of literature that tells us that is not exactly true. In Texas, the number is significant although I don't believe that 50% of all marriages in Texas will end in divorce.

THIS BLOG IS NOT A SUBSTITUTE FOR THE ADVICE OF AN ATTORNEY

However, if you come home to find the babysitter and your significant other wrapped up in the Texas Flag, I'm putting my money on divorce.

If you want a divorce, for whatever reason, the first thing you should do is hire an attorney specializing in Family Law. Texas has what is called the "no fault" divorce. That basically means that the court can grant your divorce regardless of fault if the marriage is insupportable because of discord or conflict that destroys the legitimate ends of marriage and prevents any reasonable expectation of reconciliation. So if your reason for divorce can fit into that description then you may have a good shot at the court granting your divorce.

If you don't believe that you and your spouse were ever actually married, then you are looking for an annulment to declare your marriage void, and not a divorce. Texas law lays out a few grounds for divorce that can be found in the Texas Family Code:

• Insupportability
• Cruelty
• Adultery
• Conviction of a felony
• Abandonment
• Living apart for three years
• Confinement in a mental hospital

Basically, if you can testify that you sincerely believe that the marriage is beyond repair, then your divorce will probably be granted. Then the fun starts! The reason Texas law allows for no-fault divorce is because the lawmakers realize that people are going to get divorced, and not having to assign fault is meant to assuage the need to bring up who screwed the babysitter and how many times and avoid all the other ugly details being played out in court. You don't think the marriage can be repaired...fine you get a divorce. Spare me the details. Also, there is the belief that one can't be forced to stay in a marriage against their will. Marriage is a status, not really a contract.

If you want a divorce, it doesn't necessarily have to take place in court. The court can refer the suit to arbitration if both parties agree in writing. This route may be able to save you some money.

There is also the option of a mediated settlement. This will also require both parties to agree in writing.

Also, both parties can agree in writing to dissolution of marriage under collaborative law procedure. Here the parties and their attorneys will try to resolve the dissolution of marriage without the help of the court system. This might end up being the least costly method.

After all this you still  have to consider who gets the kids (if there are any), who gets the  house or other valuable property (if there is any). Maybe you'll be able to get child support, or spousal support. Attorneys fees (most attorneys don't work for free), court fees (the state wants their cut)...all issues you are going to have to consider.

No matter what, YOU SHOULD CONSULT AN ATTORNEY. No part of this writing should be considered legal advice. This writing is not advising you on divorce, nor on any other legal matter. This blog is only meant for entertainment purposes and nothing in it should be considered true or an actual representation of the law.

THIS BLOG IS NOT A SUBSTITUTE FOR THE ADVICE OF AN ATTORNEY