Sunday, December 28, 1997

Tax write-offs

By NANCY MICHAELS / Scripps Howard News Service

Here it comes again, sure as death and, well, taxes.

The year 1997 may be just about behind us, but there's still the matter of its taxes to consider. As a small-business owner, you probably don't have a full-time accountant keeping an eye on your books and looking out for write-offs. That's why it's a good idea to get into the habit of keeping detailed records throughout the year of all of your business-related expenses.

Keep bills, receipts and mileage records in an 'a to z' file available at any office supply store. Store copies of all accounts receivables in another file system which has separate folders for each month. When it's time to figure your taxes, everything will be in one place, with hard records to back up your claims.

Tax write-offs that a small-business owner may take include:

-- Your automobile mileage for business purposes. You can either keep track of all of your automobile expenses and deduct the portion of them that are attributable to your business, or simply keep a log of your business mileage, and deduct 31.5 cents per mile of business.

-- your phone bill. Your business line is 100 percent deductible. But if you work out of your home and use your personal line for business, no portion of that is deductible. However, if you subscribe to special phone services you use for business, such as call-forwarding or voice mail, you may claim those as business expenses.

-- Office supplies. Everything from paper clips to that paper shredder you bought this year.

-- The rental on your office.

-- Your home office. If you work from your home and use your office exclusively and regularly for your business, you may deduct a portion of what you pay to maintain your home, based on the square footage of your work space. For example, if your home is 1,200 square feet and you use 300 square feet, or 25 percent for your business, you may deduct 25 percent of your mortgage, heat, electricity, real estate taxes, homeowners insurance, etc. The office must be the principle place of business. Next year, the home office deduction will be less stringent. The Home-Based Business Fairness Act allows taxpayers who perform services outside the home to claim the home office deduction as long as they use their offices for administrative tasks.

-- Health care costs. Current legislation allows sole proprietors, partnerships and S corporations to deduct 30 percent of their health insurance premiums. However, new legislation will increase the deduction of health insurance costs for the self-employed. The increase will go up gradually to 80 percent by 2003 and 100 percent by 2007.

Major improvements. These can be immediately deducted up to $17,500, or depreciated over time, typically a five-year period.

Other business expenses that can be claimed as a business expense include, Legal and professional fees, advertising and promotion, subscriptions to professional journals, dues for professional organizations, insurance on business assets, bank service charges, shipping, postage, rental on equipment, repairs, license fees, education expenses, seminars, workshops and conventions

"If it's connected with the business in any way shape or manner, it's a business deduction," said Massachusetts accountant, Tom Staiti.

(Nancy Michaels, a small-business marketing consultant, is author of the audiotape and 50-page resource guide, "How to Be a Big Fish in Any Pond. " Her company, Impression Impact, is at 369 Lindsay Pond Rd., Concord, MA, 01742.)