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Tuesday's Tax Tip: Overlooked Deductions

Posted by Gayle Kesten Tuesday, Feb 26, 2008, 10:38 AM ET

There's nothing super about eight Tuesdays from today. That brings us to April 15, and you know what that means.

So I hereby declare Tuesdays my official tax tip day. Today's tidbit: overlooked deductions.

One example, according to Fortune Small Business, is miscategorizing the cost of a business-related hotel stay as "entertainment" instead of "lodging." The former is 50 percent deductible, the latter is 100 percent deductible. For the same reason, think twice about what you classify as a "business meal" that really could be considered an "offsite strategic business planning meeting."

From the National Federation of Independent Business: Don't forget to keep record of business-related expenses you pay in cash. You know, little things like parking meters and newspapers. Over a year's time, they add up. Same goes for tracking the miles you drive for business. Common wisdom says you should keep a log in your car. (I keep track of my whereabouts in an old-fashioned calendar, then go back and tally up my miles with the help of MapQuest.)

Finally, did you know you can save on taxes by employing your family members? According to the American Institute of Certified Public Accountants, you can deduct for reasonable compensation paid, which reduces the amount of taxable business income that flows through to you. Another FYI: If you're a sole proprietor and employ a relative who's younger than 18, then you don't have to pay FICA taxes. Just don't go breaking any child-labor laws.

This list is by no means complete. What overlooked deductions can you add?

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