If you are incorporated and have revenues of say 20k. If 5k go to expenses, will you only be responsible for paying tax on 15k?
Dumb question i know.
Dumb question i know.
business expense question
- Thread starter wickedDUDE
- Start date
You might want to ask an accountant.
It varies, food is tax deductible at $0.50 on dollar for example.
Travel at a different rate. You also might want to consider what you expense out.
The more you expense out, the less you report on your personal tax returns.
Which may sound good until you want to get a mortgage, then you're leaving some of your income off the table when it comes to qualifying for a home.
What are you talking about? You report your gross, and schedule out expensed deductions to get the net- the GROSS is still a matter of record, so you never "leave income off the table"- it's all on your 1040. You don't just "report your net", brah.
Guess Soup don't know everything...lol.
I over simplified.
I'm comparing personal income to business income with consideration.
If they're two different taxable entities...
For example, I'm a W-2'd employee of my business - my business happens to be wholly owned by another business which I'm an officer of.
I know this is how it works, because it happened to me first hand.
Business made over 200K one year, my personal income was "35,000". The business expensed the rest out.
When it came time to get a mortgage I couldn't just use my personal tax returns to qualify for the loan amount I wanted, I had to go "stated income" and get a signed letter from a CPA noting how much I actually made and what the industry average for my job title was.
If you're acting as sole operator and officer I'm assuming you'd be correct with that statement of reporting gross, but I wasn't framing my statement as such.
Sorry for the confusion.
For federal purposes, yes. You can deduct most operating expenses (exceptions include capitalized assets that must be depreciated, talk to your CPA), but for State B&O taxes, these are typically calculated on gross revenues, no matter what your expenses are, so the calculations are typically different.