How to Deduct Interest on agenda C, Line 16

Can I Deduct Property Taxes - How to Deduct Interest on agenda C, Line 16

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Interest expense is a deductible expense for Sole Proprietors on agenda C, Line 16. The purpose of this description is to make sure you take benefit of the many types of interest expense you are likely to incur in your small business.

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Can I Deduct Property Taxes

Line 16 of agenda C offers two main categories of interest expense: Mortgage interest (Line 16a) and Other (Line 16b). Let's take a closer look at each of these categories.

Mortgage Interest. If you purchase real estate for use in your business, such as a commercial office building or a storefront property, and take out a mortgage on that property, the interest expense on that loan is 100% deductible. Be sure to deduct this interest here (on agenda C) rather than as a personal itemized deduction (on agenda A). The reason: interest deducted on agenda C is worth more in tax savings than interest deducted on agenda A, because any agenda C expense will sell out both wage tax and self-employment tax; any agenda A expense will sell out only wage tax.

Another word of caution: If you are taking the Home Office deduction, be sure to deduct the company measure of your residential mortgage interest on Form 8829 rather than here on agenda C. The company measure of that interest will flow from Form 8829 to your agenda C, Line 30.

Other Interest. There are some types of valid non-mortgage company interest. Two of the most common are:

1. Auto loan interest, to the extent the vehicle was used for business. So, if your vehicle is used 100% for business, than 100% of the auto loan interest is deductible. Most Sole Proprietors drive the same car for both company and personal use, so you will have to apply the company use ration (business miles divided by total miles) to the auto loan interest to conclude the deductible amount. Helpful tip: you get to deduct auto loan interest regardless of whether you use the Actual expense method or the Mileage Rate Method.

2. Credit card interest, again, to the extent that the items purchased with that Credit card are used for your business. If you have a Credit card that is used exclusively for company items, then any interest or finance charges are fully deductible. But if you are using that Credit card for both personal and company items, you'll have to do an budget based on the purchase price of the discrete items expensed to that account. Helpful tip: pick one Credit card that you use exclusively for company purchases and you can avoid dealing with the budget calculation.

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Health Insurance Premiums - Mark Levin goes ape on liberals, health care reform, tyranny, and their marxist communist agenda

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How to Deduct Utilities on agenda C, Line 25

Can I Deduct Property Taxes - How to Deduct Utilities on agenda C, Line 25

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If you are a Sole Proprietor and are finding for all the deductions the tax law allows you to take, make sure you properly deduct utilities on agenda C. This narrative will give you the details on the do's and don'ts of utility price deductions.

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Can I Deduct Property Taxes

What you can deduct. Let's start with the good news. If you have a business location that is isolate from your personal residence, such as an office, a store, a warehouse, or other commercial construction (regardless of either you own or rent this structure), you are entitled to fully deduct all utilities expenses. This would comprise the obvious: electricity, gas, water, sewer service, waste disposal and telephone service. All these expenses should be reported on agenda C, Line 25.

What you cannot deduct. Now comes the bad news. Sole Proprietors who work out of their home often assume they can take a deduction for their home phone line. This is especially true of those who qualify for the home office deduction. I'm sorry to disappoint you, but if you only have one line coming into your home, you can never deduct the base rate for the first line into your residence, regardless of how much you use that line for business purposes.

Here's what you can deduct related to the business use of your home phone: 1. The cost of any added lines into your home that are used exclusively for business are deductible. For example, if you have a second line that is dedicated to business use, you can write off the price related with that line. an additional one example would be a second line that is used only as a business fax line; 2. Any long length business charges are deductible, regardless of how many lines you have coming into your home. It is requisite to specifically identify those business calls on your monthly phone bills and add them up to determine the actual expense. You can even deduct business long length calls on the first line.

Another important mistake you want to avoid is reporting your other home utility expenses (such as electricity, gas, water, etc.) on agenda C, Line 25. If you qualify for the home office deduction, you are entitled to deduct the business use ration of those home utilities, but you must narrative those expenses on Form 8829 first. The total of all your home office expenses is then transferred from Form 8829 to agenda C, Line 30.

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