As a sole proprietor, it*s wise to familiarize yourself with the some key deductions that can reduce your taxation bill for 2004. Small-business consultants fairly often recommend that you hire an accountant to prepare your tax returns, payroll and financial statements. But you should also meet with your accountant well before the year-finish rush to discuss such matters as tax planning, and record keeping for taxation deductions.

Seven common small business tax deductions:

1. Employee Benefit Plans - You may deduct contributions to employee benefit plans (such as health insurance plans and retirement plans). Depending on your circumstances the maximum contribution that you may deduct per employee in a qualified retirement plan can go up to:

$100,000 or more For a Defined Benefit Plan

$44,000 For a 401(k) plan

$41,000 For a SEP-IRA or Keogh

2. Automobile Expenses- You might elect to deduct the actual expenses incurred (including gas, oil, tires, repairs, insurance, depreciation, and rent or lease payments) for the business-related portion of your car or truck expenses, or simply take the 2004 standard mileage rate of 37.5 cents per business mile.

3. Taxes - You may deduct Social Security and Medicaid taxes paid to match required withholdings on employee wages, federal unemployment taxes, sales taxes and real estate or personal property taxes paid on business assets.

4. Home Office - Depending on whether you make use of your home or other real estate for business purposes, you can deduct some or all of any mortgage interest paid, as well as some or all of the maintenance and repair expenses associated with the property. The cost of utilities and business supplies associated with business utilize are also deductible.

5. Depreciation - Depreciation might be taken on passenger cars, equipment used for entertainment or recreational purposes (i.e., photographic equipment, cell phones and computers), as long as these items are used solely for the business.

6. Professional Fees - You may deduct professional fees, such as those paid to a lawyer or accountant.

7. Meals and Entertainment - You may deduct 50 percent of meal and entertainment expenses directly associated with the conduct of your business.

Remember to keep on document the records and documentation necessary to substantiate all of your deductions.

Daniel Lamaute, of Lamaute Capital, Inc. specializes in setting up retirement plans for small business owners.

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