Posted on August 24, 2005 at 17:05:48:
When business income is reported on personal tax returns—owned as proprietor or pass-through entity—it’s smart to make the most of every deduction you can.
Best bet is to maximize business retirement-plan contributions. This option is available even if the owner of a sideline business is also enrolled in an employer’s retirement plan. In some circumstances it is even possible to deduct the contribution before it is made, then fund it through a refund.
On a Schedule C, an owner can take full deductions for expenses that would be limited elsewhere. In addition to health insurance, such expenses as legal fees, tax-planning fees, auto and computer use, work-related publications and memberships—subject to a 2-percent-of-AGI floor if taken as miscellaneous business-related expenses—are completely deductible. Also, large amounts of business equipment can be expensed and deducted immediately.