Sole proprietors and disregarded LLC owners may buy personally or through the business; federal deductions follow documented business use. A partnership or S corporation may own and depreciate its car or reimburse owner business driving. Check classification, title, and mileage records first. Owners pay tax on taxable personal use; employers handle payroll. The 6,000-pound rule never guarantees a full write-off.
Self-employed · Partnerships · Corporations
Research done in the US, including engineer pay, materials and prototypes built to settle the design, is deducted in the year paid or incurred under section 174A. Research done abroad, such as prototype builds at a foreign contract manufacturer, is amortized over 15 years. Tooling and test equipment are depreciated, and production units are inventory.
Corporations
Yes. Under section 174A, a corporation deducts US software development costs, including developers' pay, in the year paid or incurred for tax years beginning after 2024, unless it elects to amortize them over at least 60 months. Unamortized 2022–2024 US costs can be deducted on the first post-2024 return, split over two years, or left on schedule.
Corporations
An S corporation owner with more than 2% ownership may deduct premiums when the corporation pays or reimburses them, includes them in W-2 box 1, and the owner has enough wages. A partner generally needs partnership payment or reimbursement reported as a guaranteed payment. Both deductions are limited by business income and months eligible for subsidized employer coverage.
Self-employed · Partnerships · Corporations
Your business may lower federal tax by claiming documented business expenses, choosing eligible equipment write-offs, using the qualified business income deduction, funding a retirement plan, and claiming credits it qualifies for. Entity and state choices can matter too. The right mix depends on profit, employees, cash needs, asset use, and your state's rules.
Self-employed · Partnerships · Corporations
For federal tax, your S corporation salary is not qualified business income (QBI). Higher salary usually lowers pass-through QBI but may help the wage limit above the threshold. Keep pay reasonable. You pay tax on your profit share even without a distribution and claim the deduction using the K-1 statement. Partners' guaranteed payments remain taxable but are excluded from QBI.
Corporations · Partnerships
First, document business use. An S corporation can reimburse its shareholder-employee through an accountable plan requiring timely proof and return of excess; a written plan is optional. Qualifying payments are excluded from wages, while failed payments are taxable wages subject to corporate payroll taxes. Partners should check the partnership agreement: required unreimbursed business costs may be deductible on Schedule E.
Partnerships · Corporations
Yes, if the startup is a qualified small business: gross receipts under $5 million this year and none before the five-year window ending this year. It elects up to $500,000 of its research credit in Form 6765 Section D on a timely income tax return. The offset starts the first calendar quarter after that return is filed, claimed on Form 8974 with Form 941.
Corporations
A C corporation can claim founders' pre-incorporation costs only once it bears them: by repaying them, owing them as a loan, or recording a contribution. Formation fees are organizational costs and pre-launch market research is a start-up cost: each gets a limited deduction in the year business begins, the rest over 180 months. Qualifying US development is research, deducted when paid.
Corporations
First confirm acquisition and readiness dates. Qualifying GPU servers acquired after January 19, 2025 can receive 100% federal bonus when ready for business use by year-end. Section 179 has cost and income limits. Used equipment can qualify; foreign use and state rules differ. Corporations or owners generally pay tax on ordinary income from fully deducted equipment sales.
Corporations · Partnerships · Self-employed