TAXES: Things to know as a small business owner


FORT IRWIN, Calif. — Being a Small Business Owner is a rewarding yet complex endeavor. This endeavor becomes even more difficult at the time to file tax returns. It is a natural instinct to want to claim as a deduction every penny invested in the business; however, this may not always be the case. For example, a person who owns a property and uses that property as part of their business may not be able to deduct every expense as a deduction. Ideally, a small business owner would like to deduct all the money spent in the home such as — mortgage interest, rent, utilities, maintenance, etc. However, sometimes, small business owners forget to ask a fundamental question; that is, did I personally enjoy the benefit of this expenditure or was this expenditure strictly for the use of the business?

If the answer is that you enjoyed the benefits of that expenditure – meaning, you eat part of that food, you used that business office in your house after hours for personal use, you used that car for personal trips on the weekend – then you cannot claim that expense as a deduction in your taxes, at least not entirely. In order to claim an expense as a deduction, the business owner must meet the Exclusive Use test. The test requires that the taxpayer specifically and strictly used that expense for the business only. In the case of someone who is a Family Care Center (FCC) provider, it means that the owner of the FCC must have used the area in the house, the food in the fridge and anything else, only for the business part of the house. So when it is time to file taxes, the owner must be able to show that every expense was only for the portion related to business and it was not for both business and personal use.

Remember some exception may apply, so if you are a FCC provider and you have questions about what you can claim as a deduction in your taxes, please stop by the Tax Center in Bldg. 230 or call us at 760-380-1040.