JeepGirl6 10:12 AM 01-06-2011
Is their a limit on how many deductions you can use for taxes? For example, are you only allowed to deduct so much $ in food, utitlies, house payment, time space, etc? Or are you able to deduct your exact amount that you come up with?
TomCopeland 04:16 PM 01-06-2011
There are no limits to the allowable deductions you can claim. However, in order to claim a business expense it has to be "ordinary and necessary". So, a provider who earns $25,000 in income would have a problem deducting $15,000 of toys, even if she actually spent that much. The idea here is that there is a "reasonableness" standard.
Also, if you show a loss in your business for three out of five years this will attract attention from the IRS. Often, providers get audited because of losses. Having a loss in your first year or two of business may not attract attention, but consistent losses or big losses will.