A simple explanation of two IRS deductions for small businesses

The Internal Revenue Service (IRS) provides some tax benefits to small businesses. Many of these benefits are in the form of tax deductions. When it comes to pass-through entities like sole proprietors, partnerships and limited liability companies (LLC), two examples include:

Tax deduction #1: Business losses

The IRS allows small business owners to claim certain business losses as a tax deduction on their federal tax returns. The IRS generally requires the business owner to calculate the net operating loss by taking the adjusted gross income and subtracting standard or itemized deductions, but not personal exemptions.

The tax code also limits the deduction to business owners who file $250,000 for single returns or $500,000 joint. Additional restrictions are present for activity the agency considers passive. The IRS states passive activity is that the business does not participate in on a regular basis. The agency still allows deductions for passive activity, but the IRS generally caps this amount and does not allow it to exceed the income of the business.

Tax deduction #2: Business expenses

The federal agency also allows businesses to deduct “ordinary and necessary” expenses. Examples of qualifying business expenses eligible for a deduction include the expense of a home or other property, rent, business vehicle, internet and a portion of meals and entertainment. Business owners with employees can also deduct employees’ pay and other expense related to employees’.

Business owners are wise to carefully review these and other tax planning strategies to better ensure they make the most of potential tax savings.

No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Frost & Associates, Attorneys at Law
1629 K Street NW, Suite 300
Washington D.C., 20006

Phone: 202-618-1873

Fax: 888-235-8405
Washington Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401  
Phone: 202-618-1873
Fax: 888-235-8405
Annapolis Law Office Map

Columbia Office
10440 Little Patuxent Parkway,
Suite 300
Columbia, MD 21044

Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850
Phone: 240-599-5009 
Fax: 888-235-8405
Map & Directions

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031
Phone: 703-621-7169
Fairfax Law Office Map