The only "know how" guide for professionals who want to reduce their tax burden. If you're ready to hold on to more of your hard-earned money, turn to Tax Deductions for Professionals. Comprehensive, easy to read and filled with interesting examples, the book is organized into practical categories featuring common deductions, including: -start-up and operating expenses -health deductions -vehicles and travel -entertainment and meals -home office -and many more Plus -- unlike any other book on the market -- Tax Deductions for Professionals can help you choose the best legal structure for your practice, the most important business (and tax) decision you'll make. The book also covers putting money into retirement accounts, the tax implications of owning the building you work in, and deducting the cost of continuing education, professional fees and other expenses.

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The tax code is full of deductions for professionals—from automobile expenses to wages for employees. Before you can start taking advantage of these deductions, however, you need a basic understanding of how businesses pay taxes and how tax deductions work. This chapter gives you all the information you need to get started. It covers: how tax deductions work (Section A) how to calculate the value of a tax deduction (Section B), and what professionals can deduct (Section C). A. How Tax Deductions Work A tax deduction (also called a tax write-off) is an amount of money you are entitled to subtract from your gross income (all the money you make) to determine your taxable income (the amount on which you must pay tax). The more deductions you have, the lower your taxable income will be and the less tax you will have to pay. 1. Types of Tax Deductions There are three basic types of tax deductions: personal deductions, investment deductions, and business deductions. This book covers only business deductions—the large array of write-offs available to business owners, including professionals. Personal Deductions For the most part, your personal, living, and family expenses are not tax deductible. For example, you can't deduct the food that you buy for yourself and your family. There are, however, special categories of personal expenses that may be deducted, subject to strict limitations. These include items such as home mortgage interest, state and local taxes, charitable contributions, medical expenses above a threshold amount, interest on education loans, and alimony. This book does not cover these personal deductions. Investment Deductions Many professionals try to make money by investing money. For example, they might invest in real estate or play the stock market. They incur all kinds of expenses, such as fees paid to money managers or financial planners, legal and accounting fees, and interest on money borrowed to buy investment property. These and other investment expenses (also called expenses for the production of income) are tax deductible, subject to strict limitations. Investment deductions are not covered in this book. Business Deductions Because a professional practice is a profit-making enterprise, it is a business for tax purposes. People in business usually must spend money on their business—for example, for office space, supplies, and equipment. Most business expenses are deductible, sooner or later, one way or another. And that's what this book is about: How professionals may deduct their business expenses. 2. You Pay Taxes Only on Your Profits The federal income tax law recognizes that you must spend money to make money. Virtually every professional, however small his or her practice, incurs some expenses. Even a professional with a low overhead practice (such as a psychologist) must pay for office space and insurance. Of course, many professionals incur substantial expenses, even exceeding their income. If you are a sole proprietor (or owner of a one-person LLC taxed as a sole proprietorship), you are not legally required to pay tax on every dollar your practice takes in (your "gross income"). Instead, you owe tax only on the amount left over after your practice's deductible expenses are subtracted from your gross income (this remaining amount is called your "net profit"). Although some tax deduction calculations can get a bit complicated, the basic math is simple: the more deductions you take, the lower your net profit will be, and the less tax you will have to pay.

 

The only "know how" guide for professionals who want to reduce their tax burden.

Introduction A. Why You Need This Book B. The Ever-Changing Tax Laws C. Icons Used in This Book 1. Tax Deduction Basics A. How Tax Deductions Work B. The Value of a Tax Deduction C. What Professionals Can Deduct 2. Choice of Business Entity A. Types of Business Entities B. Limiting Your Liability C. The Four Ways Business Entities Are Taxed D. Comparing Tax Treatments E. Should You Change Your Business Entity or Tax Treatment? 3. Operating Expenses A. Requirements for Deducting Operating Expenses B. Operating Expenses That Are Not Deductible C. Tax Reporting 4. Meal and Entertainment Expenses A. What Is Business Entertainment? B. Who You Can Entertain C. Deducting Entertainment Expenses D. Calculating Your Deduction E. Expenses Reimbursed by Clients F. Reporting Entertainment Expenses to the IRS 5. Car and Local Travel Expenses A. Deductible Local Transportation Expenses B. The Standard Mileage Rate C. The Actual Expense Method D. How to Maximize Your Car Expense Deduction E. Other Local Transportation Expenses F. Reporting Transportation Expenses on Schedule C G. When Clients Reimburse You H. Professionals With Business Entities I. Should You Trade In or Sell Your Old Car? 6. Long Distance Travel Expenses A. What Is Business Travel? B. What Travel Expenses Are Deductible C. How Much You Can Deduct D. Maximizing Your Business Travel Deductions E. How to Deduct Travel Expenses F. Travel Expenses Reimbursed by Clients 7. The Home Office Deduction A. Qualifying for the Home Office Deduction B. Calculating the Home Office Deduction C. How to Deduct Home Office Expenses D. Audit-Proofing Your Home Office Deduction 8. Deductions for Outside Offices A. If You Rent Your Office B. If You Own Your Office C. If You Lease a Building to Your Practice 9. Deducting Long-Term Assets A. Long-Term Assets B. Section 179 Deductions C. Depreciation D. Tax Reporting and Record Keeping for Section 179 and Depreciation E. Leasing Long-Term Assets 10. Start-Up Expenses A. What Are Start-Up Expenses? B. Starting a New Practice C. Buying an Existing Practice D. Expanding an Existing Practice E. When Does a Professional Practice Begin? F. How to Deduct Start-Up Expenses G. Expenses for Practices That Never Begin H. Organizational Expenses 11. Medical Expenses A. The Personal Deduction for Medical Expenses B. Self-Employed Health Insurance Deduction C. Deducting Health Insurance as an Employee Fringe Benefit D. Adopting a Medical Reimbursement Plan E. Health Savings Accounts 12. Retirement Deductions A. Why You Need a Retirement Plan (or Plans) B. Types of Retirement Plans C. Individual Retirement Accounts-IRAs D. IRAs for Businesses E. Qualified Retirement Plans F. Keogh Plans G. Solo 401(k) Plans H. Roth 401(k) Plans 13. Inventory A. What Is Inventory? B. Do You Have to Carry an Inventory? C. Deducting Inventory Costs D. IRS Reporting 14. More Deductions A. Advertising B. Business Bad Debts C. Casualty Losses D. Charitable Contributions E. Clothing F. Disabled Access Tax Credit G. License Fees, Dues, and Subscriptions H. Education Expenses I. Gifts J. Insurance for Your Practice K. Interest on Business Loans L. Legal and Professional Services M. Taxes N. Domestic Production Activities 15. Hiring Employees and Independent Contractors 16. Professionals Who Incorporate 17. How You Pay Business Expenses 18. Amending Tax Returns 19. Staying Out of Trouble With the IRS 20. Record Keeping and Accounting 21. Help Beyond This Book Index

Stephen Fishman, Attorney Stephen Fishman is the author of many Nolo books, most recently Tax Deductions for Professionals. Other titles include Deduct It! Lower Your Small Business Taxes, Every Landlord's Guide to Tax Deductions and Home Business Tax Deductions: Keep What You Earn—plus many other legal and business books. All are published by Nolo. He received his law degree from the University of Southern California in 1979. After stints in government and private practice, he became a full-time legal writer in 1983. Products by Stephen Fishman, Attorney: Choose the Best Legal Entity for Your One-Person Business Consultant & Independent Contractor Agreements The Copyright Handbook: How to Protect & Use Written Works Deduct It! Lower Your Small Business Taxes Every Landlord's Tax Deduction Guide Home Business Tax Deductions: Keep What You Earn How to Safely & Legally Hire Independent Contractors Nondisclosure Agreements: Protect Your Trade Secrets & More The Public Domain: How to Find Copyright-Free Writings, Music, Art & More Tax Deductions For Professionals Web & Software Development: A Legal Guide What Every Inventor Needs to Know About Business & Taxes Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants Working With Independent Contractors

 

Tax Deductions For Professionals by Stephen Fishman
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