Can I Deduct Business Expenses & Still Have a Standard Deduction?

Self-employed business people can deduct expenses associated with their business to offset their self-employment income. You may even have a business loss that offsets other income, reducing your taxable income. These expenses are reported separately from your other tax deductions. Since business expenses are reported on Schedule C, you can deduct them even if you don’t itemize -- that is, if you choose to take the standard deduction.

Schedule C

You use Schedule C to record the income from your business, as well as expenses associated with that business. You can deduct items such as office supplies, professional fees, advertising expenses, travel and mileage. You deduct these expenses from your income to figure your profit or loss and record this amount on Line 12 of Form 1040. If your business expenses are less than $5,000, you can use Schedule C-EZ instead of Schedule C.

Standard Deduction

The IRS allows every taxpayer to reduce his taxable income by a standard deduction. The IRS sets the amount for the standard deduction each year. You’re allowed to choose between the total of all your itemized deductions, as reported on Schedule A, and the standard deduction – choosing whichever amount is the greatest results in the most tax savings. If you’re over 65 or blind, you can take an extra standard deduction. Take the standard deduction on Line 40 of Form 1040.

Standard Deduction Not Allowed

Though most taxpayers have the option of taking the standard deduction instead of itemizing, a few people must itemize. If you’re married filing separately and your spouse itemizes, you also must itemize. If you change the accounting method of your business and are required to file a new tax return for a period of less than 12 months, you can’t take the standard deduction, and if you were a nonresident alien for part of the year you also can’t use the standard deduction.

Additional Deductions

Even if you elect to take the standard deduction, the IRS does allow a few other deductions and credits that you can take on Form 1040 without itemizing. These include tax-exempt contributions to a health savings account or a retirement plan, alimony, student loan interest, education expenses, the cost of self-employed health insurance and part of the amount you pay in self-employment tax.

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About the Author

Cynthia Myers is the author of numerous novels and her nonfiction work has appeared in publications ranging from "Historic Traveler" to "Texas Highways" to "Medical Practice Management." She has a degree in economics from Sam Houston State University.

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