• James D. Lynch

WHICH TAXES CAN A BUSINESS DEDUCT AS A BUSINESS EXPENSE?

There are many different kinds of taxes. Some are personal taxes, while others are business taxes.


Examples of deductible business taxes include:


● Payroll taxes: the employer's portion of FICA (Social Security and Medicare tax) as well as federal & state unemployment tax. ● State business income taxes and franchise tax. ● Property taxes on property owned by the business. ● Taxes on business purchases (e.g. sales tax paid on purchased items, airline tax and hotel tax for business travel, etc. Note these taxes are not separated out. They are considered a part of the cost of the item purchased.)


Personal taxes, such as your personal income taxes and property taxes on your personal residence, are not business deductions. These should therefore be paid from your personal bank account. If you pay personal taxes from your business bank account, they must be recorded as distributions and not as expenses.


Sales tax collected from customers should not be recorded as an expenses when remitted to the state, nor should it be recorded as income when collected from customers. Instead, it should be recorded as a liability in a sales tax payable account.

  • LinkedIn Social Icon
  • Facebook Social Icon
  • Twitter Social Icon
  • alignable_square
  • Yelp Social Icon
  • avvo
  • Justia-Icon
  • lawyer_com favicon
  • taxbuzz
  • ptin-seal
  • 170927-usnsquarelogo-design
  • favicon-32x32
  • mail icon

Law Office of James D. Lynch, PLLC

3000 Joe Dimaggio Blvd #90, Round Rock, TX 78665

info@jimlynchlaw.com

(512) 745-6347

(714) 745-3875

©2020 by Law Office of James D. Lynch, PLLC. The information contained in this website is for informational purposes and is not to be considered legal advice.  Any correspondence between you and the Law Office of James D. Lynch is not intended to create an attorney-client relationship.  Please do not send confidential information to us until after an attorney-client relationship has been established by an engagement letter signed by the proposed client and our attorney.