Ordinary (common and accepted in that particular field of business), and.To qualify as a valid deduction, business expenses must be both: Do not include the cost of goods sold and purchases that need to be capitalized as part of business expenses. You can claim the cost of running the business as business expenses. Cost of goods sold (COGS) - If you make or buy goods to sell, you may deduct the cost of goods sold from your gross receipts on Schedule C, calculated on Schedule C-1, Cost of Goods Sold and/or Operations.Returns include cash or credit reimbursements the business makes to customers, as well as any other allowances deducted from the actual sales price Returns and allowances - If you make or buy goods to sell, you may deduct any returned and/or damaged merchandise you included in your gross receipts.Gross profit is equal to gross receipts minus the following: Consignment of merchandise to others to sell (until actually sold).Like-kind exchanges (also known as 1031 exchanges).Appreciation increase in property value (until realized through a sale or taxable disposition). Money you borrowed through a bona fide loan.The barter of property or services (fair market value).Checks and credit card charges received.Gross receipts (business income) include: Massachusetts law does not allow any federal Schedule A deductions for mortgage interest and real estate taxes. However, like the federal rules, those who elect the safe harbor method can't deduct any part of mortgage interest and real estate taxes for the business use of a residence on their Massachusetts Schedule C, even if they can on their federal Schedule A. Generally, if you choose to use the safe harbor method of claiming the home office deduction on federal Schedule C (Line 30), you may deduct the same amount on MA Schedule C (Line 29) as "expenses for business use of your home" as long as it doesn't exceed $1,500. The depreciation deduction allowable for the business part of the home for the taxable year is 0.īy using the safe harbor method, you may deduct certain expenses related to the home (e.g., mortgage interest and real estate taxes) exclusively on your federal Schedule A - Itemized Deductions.Any disallowed amount carried over from a previous taxable year in which you calculated and substantiated actual expenses is not deductible in the current year.Any actual expenses related to the qualified business use of the home for the taxable year are not deductible. The allowable deduction for home office expense is $5 per square foot (maximum of 300 square feet) of qualified home office space used, up to a maximum yearly deduction of $1,500. You may use an optional safe harbor method to figure out the amount of deductible expenses related to certain business use of your home. If you have an office in your own home, you're allowed a deduction for expenses related to home office use. If you earn or get income from sources both within Massachusetts and elsewhere and can't determine the exact amount of Massachusetts source income, apportion your income
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