As a small business owner, its wise to familiarize yourself with some key deductions that can reduce your tax bill for 2004.

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

$100,000 or more With a Defined Benefit Plan

$ 44,000 With a 401(k) plan

$ 41,000 With a SEP-IRA or Keogh

Automobile Expenses- You may 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.

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

Home Office - Depending on whether you utilize 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 make use of are also deductible.

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.

Bonus Depreciation - The bonus depreciation deduction of up to 50 percent of the cost of new business equipment in the year of purchase applies only to property placed in accomadation on or before December 31, 2004. You may want to think about making any significant equipment purchases before year-finish to take advantage of this expiring provision.

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

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

State and Local General Sales Tax - Beginning in 2004, you will have the option of electing to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction provided for state and local income taxes.

Charitable Donations of Vehicles Through 2004, a deduction equal to the fair advertise assessment of value of a donated vehicle is allowed. Starting next year, however, the deduction allowed will fairly often be limited to the gross proceeds from the sale of the vehicle by the charitable organization.

Remember to keep on document the records and documentation necessary to substantiate all of your deductions. You should consult a tax preparer or professional tax advisor to determine how explicit taxation rules might impact your individual situation.

Daniel Lamaute specializes in setting up retirement plans for the self-employed. Visit http://www.investsafe.com to learn about methods to maximize retirement contributions and to reduce taxes and penalties on early withdrawals.