The Internal Revenue Service (IRS) limits the amount you can deduct for LLC start-up expenses.
Under the uniform capitalization rules, you must capitalize direct costs and part of the indirect costs of certain production or resale activities, unless you are a small business taxpayer (defined below).
Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling and administrative costs.
A tax deduction (or "tax credit") is an expense that you can deduct from your taxable income.
You take the amount of the expense and subtract it from your taxable income.
Basically, tax deductions allow you to pay a lower tax bill. But the expense has to fit the IRS criteria for a tax deduction. An LLC can deduct certain federal, state, local and foreign business taxes.
LLC owners can usually deduct the cost of taxes in the year they are paid.
Specifically, a business can deduct the cost of state and local income taxes, real estate taxes and other taxes incurred by the business.
The choice of tax year is made in the corporate income tax return, which must be filed within 2.5 months after the end of the first tax year.
Company books, including those that help you to dispense with legal and tax professionals, are fully deductible as a cost of doing business.
If you have a home office, or use part of your home to run your business, you can deduct the costs of renter's insurance as part of your home office deductions.
The deductions listed above can be claimed on Schedule C or Form 1065, but there are a few other tax exemptions that small business owners often claim on their individual returns.
Because of changes created by the Tax Cuts and Jobs Act (TCJA), most small businesses can deduct 100 percent of the cost of equipment in a single year. If your home office takes up 15 percent of your home, for example, then 15 percent of your annual electricity bill becomes tax deductible.
Below is a comprehensive list of deductions that are generally available to sole proprietors and businesses organized as partnerships or limited liability companies (LLCs). However, if you use the telephone and Internet for a combination of personal and business purposes, you can only deduct the percentage of your cost that is for business use.
The IRS and local tax authorities determine LLC tax deductions, how much and when the business can take deductions based on the business's method of accounting.
As a general rule, if you use a new car primarily for business, the actual expense method provides a larger deduction at tax time.
The downside is that the benefits will be taxable when received by the disabled executive or employee.
Alternatively, the taxable C Corporation or LLC could purchase or lease a business car and include a percentage of the personal use of the car, including travel to and from the office, on the executive's or employee's W-2 form.
If your business is a partnership, a limited liability company or a corporation (a company that has elected to be taxed as a partnership), your company can make a charitable contribution and pass the deduction on to you to claim on your individual tax return.
