How to Make Your Life Tax Deductible

It is important for you to keep in mind that taxes are neither fair nor logical, and this becomes painfully obvious the more you learn about the Tax Code and the role of the Internal Revenue Service (IRS).

Furthermore, IRS Tax Code is subject to change at a moment's notice. The United States Congress approves taxing concepts; then the IRS is responsible for writing the Tax Code, which is the set of rules and regulations (in the form of tax law) detailing the specific rules that all taxpayers must follow in The preparation, filing, and paying of their taxes. Then the U.S. Congress passes tax law reflecting the Tax Code created by the IRS.

The IRS is empowered to administer and enforce all federal income tax laws and to collect all pertinent taxes.
It is very difficult for you to dive into the IRS Tax Code in an effort to understand all the details and to stay current with all the changes. All of which have been developed to allow you to take advantage of the very favorable tax laws applicable to small business ownership, to truly make your life tax deductible!

The rationale behind the IRS and Congress using tax law to engage in social engineering regarding small-business owners (creating tax law that leads small-business taxpayers to take actions that are good for the economy as a whole) is that it is becoming evident that the future success of the U.S. economy is increasingly dependent on the growth of small businesses. For example, it is estimated that upward to 60 percent of the future growth in jobs will be directly attributable to small businesses-their creation and subsequent growth. Therefore, it's beneficial for the economy to give breaks to these small businesses that will allow them to succeed.

In the final analysis, it is up to you! Small business owners enjoy two distinct benefits:

1). the profit that the businesses generate (profit that is under the control of the business owners and can be used as they see fit)

2). Tremendous tax savings (the opportunity to convert personal expenditures into tax deductible expenses and thus to enjoy considerable tax savings). Remember, you can enjoy profits and tax savings no matter what size your business is; small businesses are just as able to generate both profits and tax savings as larger businesses.

The goal in applying small-business tax strategies is to match all the allowable business tax deductions of your business against the taxable (gross) income of the business. In this manner, you will minimize its taxable income.

If you work for someone as an employee, the income you generate (in the form of W-2 wages) is subject to income taxes. This means that before you can spend any of these dollars, you must first pay all federal and state (if applicable) income taxes due. The tax due can amount to tens of thousands of dollars-drastically reducing the after-tax dollars you have available for your personal use.

However, when you become a small business owner, tax law turns in your favor. You no longer have to pay taxes first, before you spend the profit your small business generates. Before you calculate any taxes due on business profit, you may first deduct the dollar amount of all "ordinary and necessary" expenditures that your business has incurred (in pursuit of profit). Although these tax-deductible expenditures must be related to your business, you'll soon find that much personal expenditure-for travel, cars, home, and even entertainment-become tax-deductible business expenses. As a small business owner, you can literally make your life tax deductible.

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Quick Checklist Of General Deductions

Drafting an entire comprehensive checklist for residuary business expenses is not feasible. However, every professional should know about the allow ability/non-allow ability of some important expenses. Here we pulled some of important expenses are brief below here:

1. Advertisement: Expenditure on advertisements in print media/electronic media is allowable as revenue expenditure. However, any expenditure on advertisement in any souvenir, brochure tract, pamphlet or the like published by a political party is not deductible (Sec. 37(2B)].

2. Annual day celebrations: The expenditure incurred in connection with the annual day celebrations is allowable as business expenditure [CIT v. Mehsana Distt. Cooperative Milk Producers Union Ltd. [1994] 207ITR140 (Cuj.)l.

3. Payment for consultancy fees: Consultancy fee paid, for the benefit of increasing the manufacturing efficiency and formulating incentives schemes would be allowable as revenue expenditure [CIT v. Praga Tools Ltd. (1986) 157 ITR 282 f AP)].

4. Fines: Fines and penalties paid for traffic offences by the assesse company's truck drivers being penalty for infringement of law, could not be allowed as deduction [CIT v. Jaipur Golden Transport (1997) 226 ITR 399 (Del.)].

5. Penalties: Penalty paid for infraction of law, not deductible - If an assessed is penalized under one Act, he cannot claim that amount to be set-off against his income under another Act, because that will frustrate the entire object of imposition of penalty. Penalty for non-payment of sales tax is not deductible [Malwa Vanaspati & Chemical Co. V. CIT (1997) 225 ITR 383(SC)].

6. Foreign tour/travel expenses: Foreign travel expenses connected with exploratory missions and finalization of collaboration agreements are revenue expenditure [Antifriction Bearings Corporation Ltd. v. CIT (1978) 114 ITR 335 (Bom.)].

Tour expenses connected with survey of new methods or for purchase of machinery are capital expenditure [Ambica Mills Ltd. v. CIT (1964) 54 ITR 167 (Guj.)].


Tour expenses connected with initiation of new business is not deductible |CIT v. Flour & Food Ltd. (1988) 170 ITR 469 (MP)].


Tour expenses by surgeon for studying latest techniques in surgery are deductible [Dr. P. Vadamalayan v. CIT (1960) 40 ITR 501 (Mad.); CIT v. Dr. M.S. Shroff (1971) 80 ITR 687 (Del.)].


7. Foundation ceremonies: Expenditure on foundation-laying of factory is revenue expenditure [CIT v. Merck Sharp & Dohme of India Ltd. (1983) 140 ITR 332 (Bom.)].

8. Pu)a expenses: Expenditure incurred on customary Ganesh Puja at the lime of opening books of accounts, is primarily in the nature of advertisement for the assessor’s business and hence is a permissible deduction [Brijraman Das & Sons p. CTT (1983) 142 ITR 509 (All.)].

9. Diwali and muhurat expenses: Expenses incurred on the occasion of Diwali and Mahurat are in nature of business expenditure. Such expenses are deductible if the Assessing Officer is satisfied that they are not of a personal, social or religious nature (Circular Letter No.131 A/20/681TCA-J1 dated)/October 1968].

10. Interest payments: Interest for late filing of returns is not deductible [Bharat Commerce & Industries Ltd. v. CIT (1998) 230 ITR 733], Interest paid under Sec. 220(2) for late payment of income tax is not deductible as revenue expenditure [CIT v. Ashoka Mills Ltd. (1996) 218 ITR 526 (Guj.)].

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