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What Business Taxes May I Deduct? What Taxes are Non-Deductible?

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Question: What Business Taxes May I Deduct? What Taxes are Non-Deductible?
Some business taxes, like federal income taxes, are not deductible business expenses. In other words, you can't deduct the taxes you paid the IRS. But you may be able to deduct state income taxes, sales taxes, and other taxes. Here's a list:
Answer:

Deductible Business Taxes
Taxes your business pays are a cost of doing business. Other than income taxes, you may deduct expenses for other taxes your business pays:

  • City gross receipts tax
  • State unemployment insurance tax
  • State income tax or state business franchise tax
  • State, city, or local sales taxes you paid on business purchases
  • Federal social security tax (your employer portion of the tax)
  • Real estate tax or property tax on real estate owned by your business
  • State income tax
  • State unincorporated business tax
  • Tangible and intangible property tax
  • Customs, import, or tariff tax
  • License tax (for your business license, city license, or other)
  • Business vehicle registration tax
  • Gasoline tax
  • Telephone and cell phone tax
  • Taxes on business travel expenses, such as hotel taxes, air travel taxes, meal taxes, entertainment, laundry, etc.
  • Excise taxes and fuel taxes
  • Miscellaneous taxes on items like membership dues, stamps, safe deposit box rental, and others.

More on Sales Taxes
Sales taxes you pay for items you purchase for business don't need to be separated out. Just include the total amount you paid, including the tax. For a large item purchase, like a car, the sales tax is determined separately; check with your tax advisor to see how to handle this.

More on Employment Taxes and Self-employment Taxes
If you have employees, your business portion of these taxes is deductible to you. This does not include amounts withheld from employee pay for federal income tax or FICA tax. Self-employment taxes are paid by business owners for Social Security/Medicare. The amount is based on the profit of the company, but the business does not pay these taxes; they are paid on the individual's personal tax return.

More on State Income Taxes
If your business is a pass-through entity (that is, if you pay your business taxes through your personal tax return, like a sole proprietor, LLC, or S corporation), you may be able to deduct state income taxes on your business income through your personal tax return.

Disclaimer The purpose of this article is to provide general information and it is not intended to provide tax or financial advice. Every state is different and every business situation is different. Check with your tax preparer or tax advisor before taking any deductions.

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