What is the difference between “depreciating” and “expensing” an item?
• What are capital gains taxes and how do they affect my business? • What are excise taxes and how do they affect my business? • Why do some businesses have different tax years ? • What kind of payroll taxes am I liable for as an employer? • Can I avoid payroll taxes by hiring independent contractors rather than employees? • What are the tax consequences of buying or selling a business? Q: How are businesses taxed? A: When people think of taxes paid by businesses, income taxes are probably what come to mind first. But income taxes are only one of many different kinds of taxes assessed against businesses by federal, state and local governments. Oftentimes, a tax on a business is called something else like “license fee” or an “assessment,” but any payment to the government is essentially a tax. In the United States, all businesses are subject to federal taxation on their income. But they”re also subject to taxation by state and local governments, each one of which has different rules and
If you’re engaged in a bona fide business, the tax laws generally allow you a deduction against gross income for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. These expenses include: • A reasonable allowance for salaries or other compensation for personal services actually rendered • Traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business • Rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.” As a general rule, it’s better to take tax deductions as quickly as possible. So it’s a big plus for a business to be able to expense an item is that the tax benefit is realized all at once. In contrast, ex
Related Questions
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- What is the difference between "depreciating" and "expensing" an item?
