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thechamp26
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Joined: 11 Aug 2010
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Posted: 11 Jun 2011 at 15:06 \| IP Logged

boston1234 wrote:

it's the business state and
local taxes that can be deducted on the
schedule C , so sales taxes and income taxes on the
business income i
believe. the personal portion of the state and local
taxes is what is not
deductible on Sch C, but instead on Sch A.

Income taxes from business are NOT deducted on schedule C
at all.

PINKCPA
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Posted: 04 Jul 2011 at 03:30 \| IP Logged

This one is easy. Look at the IRS website below. It specifically states that you can deduct state income taxes directly related to your business on Schedule C.

http://www.irs.gov/publications/p334/ch08.html#en_US_2010_pu blink100025369

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thechamp26
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Posted: 05 Jul 2011 at 00:45 \| IP Logged

PINKCPA wrote:

This one is easy. Look at the IRS
website below. It specifically states that you can deduct
state income taxes directly related to your business on
Schedule C.

_2010_publink100025369">
http://www.irs.gov/publications/p334/ch08.html#en_US_2010
_pu blink100025369

Read it again... It says you can deduct state tax on
GROSS income on Schedule C. Then it goes on to say you
can deduct other state income (net income) tax on
Schedule A.

PINKCPA
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Posted: 05 Jul 2011 at 02:13 \| IP Logged

OK, what am I reading wrong. You can deduct state tax RELATED to your business on Schedule C. Other state or local taxes (i.e. personal/non business related) would be deducted on Schedule A if you itemize. Correct??

Income taxes. You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. Do not deduct federal income tax.

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thechamp26
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Posted: 05 Jul 2011 at 23:09 \| IP Logged

PINKCPA wrote:

OK, what am I reading wrong. You can
deduct state tax RELATED to your business on Schedule C.
Other state or local taxes (i.e. personal/non business
related) would be deducted on Schedule A if you itemize.
Correct??

<A name=en_US_2010_pu100025370></A>Income taxes.
<A =indexterm name=d0e6468></A><A =indexterm
name=d0e6473></A> You can deduct on Schedule C or C-EZ
a state tax on gross income (as distinguished from net
income) directly attributable to your business.
You can deduct other state and local income taxes on
Schedule A (Form 1040) if you itemize your deductions. Do
not deduct federal income tax.

"You can deduct on Schedule C or C-EZ a state tax on
gross income (as distinguished from net income)"

Again, notice how they say "gross income as distinguished
from net income"? States don't employ an income tax based
on a businesses gross income do they? No, it is based on
a modified net income also known as taxable income. Where
is there a spot to deduct state INCOME taxes paid for a
sole proprietor? Schedule A.

Now let's think about what they mean when they say state
taxes on gross income... What is the type of tax that is
imposed on the sale price of a good? Sales tax. Generally
speaking, all of the sales a business makes before any
sales taxes is a businesses gross income, right?
Businesses don't include sales tax the collect from a
buyer in gross income, therefore, they cannot deduct
sales tax on their return. You can't have a favorable
position without an unfavorable position. Sales tax is
simply paid by the buyer to the business which in turns
pays it to the state. I hope that made some sense....

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