What Can You Itemize on Your Taxes When You Own a Small Business?

by Tom Streissguth ; Updated July 27, 2017
Business use of your home may offer valuable deductions.

The individual tax return you prepare each year gets a bit more complicated if you run a business. The IRS allows you to itemize and deduct business expenses, but has strict rules on separating personal and business use of property, such as vehicles. In addition, the general IRS rule governing these deductions is that they must be considered "ordinary and necessary."

Business and Personal

You can itemize personal deductions on an individual tax return by using Schedule A. If you're an employee and have unreimbursed work expenses -- for example, uniforms or memberships -- these go on Schedule A. If you're running a business, however, the itemized deductions for business expenses appear on Schedule C, Profit or Loss from Business. You may not put personal expenses on this form, or deduct business expenses, on Schedule A.

Vehicle Expenses

Vehicle expenses can be an itemized business deduction. If you use a car for personal travel as well as for the business, you may only deduct that portion of expenses attributed to the business use. In other words, you would claim half of the actual expenses if you use the car for business trips half of the time. Alternatively, you can deduct 56.5 cents per mile of business travel (as of 2013), plus any tolls or parking expenses. The deduction goes on Part II, Line 9 of Schedule C.

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Start-Up Expenses

You can deduct $5,000 of start-up expenses in the first year of your business. If your start-up costs are greater, you may deduct them in equal installments over the next 15 years of tax returns. These costs can include consulting fees, market surveys, travel costs, and advertising, and appear on Schedule C, Line 27a as "Other" (any excess amount over $5,000 goes on Line 27b). If you bought equipment to get the business running, you deduct that expense through depreciation.

Equipment, Travel & Meals

You can take a host of other itemized business deductions, including any travel, meals, lodging and equipment costs related to your operations. In addition, advertising, utilities, taxes, and insurance are deductible, as are wages, fees and commissions that you pay to vendors. If you run the business out of your home, you must prepare Form 8829 to deduct the proportional share of rent or mortgage costs, depending on the amount of space the business operation occupies. These expenses are entered on Schedule C, Line 30.

About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.

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