Food Business Almanac: Tips for tax season

by | Jan 23, 2012

NCDA&CS food business specialist Annette Dunlap offers resources that small-business owners and food entrepreneurs can use to grow and manage their business. Annette is available for free one-on-one consultations and can assist small-business owners with financial and market planning through the agribusiness development section. She can be reached at

It’s tax time again, and there have been several changes in the tax law that affect small businesses. Below you’ll find tips to consider when filing your taxes this year. I’ve focused on businesses that typically prepare either a Schedule C, Schedule C-EZ or Schedule F, but some of these tips also can apply to S-corps. For more details, see “What’s New for 2011” and “Tax Changes for Small Businesses” on the IRS website. You also may find this information useful for tax planning in 2012.

Please remember, the information provided below is intended to be general tips and should not be considered tax advice. As always, consult with your tax preparer before making any decisions, as they will have a better understanding of your specific circumstances.

Mileage Rates

  • January 1 – June 30, 2011: 51 cents/mile
  • July 1, 2011 – December 31, 2011: 55.5 cents/mile

Self-Employment Tax Rate

  • For tax year 2011: 10.4 percent
  • The Medicare rate remains the same at 2.9 percent
  • The total percentage applied on your net taxable self-employment income is 13.3 percent

Self-Employed Health Care Deduction
Qualified self-employed taxpayers who pay their own health insurance costs can now reduce their net earnings from self-employment by these costs. In order to take the deduction, you must have an established health care insurance policy as part of your business. If you file a Schedule C, C-EZ or F, the policy can either be in the business’ name or in your name as the owner. Your business must report a profit to qualify. Individuals who are more than a two-percent shareholder in S-corps may also qualify. More details are available on the IRS website.

Increased Expense Limits on Qualifying Business Purchases
If you purchased tangible personal property for business use, you may be eligible to expense the entire amount of the purchase in 2011. The expense limit has been raised to $500,000 of the first $2 million of certain business property.

Other Routine Deductions

  • Subscriptions: Subscriptions to professional, technical and trade journals that deal with your business field are deductible.
  • Supplies and materials: Unless you have deducted the cost in any previous year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year.
  • Books, professional instruments, equipment: You can deduct these if you normally use them within a year. However, if the usefulness of the item extends substantially beyond the year it is placed in service, you generally must recover its cost through depreciation.
  • Utilities: Business expenses for heat, lights, power, water and sewerage are deductible. However, any part attributable to personal use is not deductible.
  • Telephone: The cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home, is not deductible. However, charges for business long-distance calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses.

Click here for more details on business expenses. The IRS also has a lot of valuable resources for small businesses on its website. I hope you find these tips helpful. If you’d like to receive additional food-business tips directly in your inbox, email me at

I’d also like to tell you about two upcoming food-business events across the state. Each event will give you a chance to network with fellow food entrepreneurs and develop your promotional plan for 2012. The events are free, but registration is required. Here are the details:

Wednesday, Feb. 1, 10 a.m. to noon – Food Entrepreneurs Round Table, Triad/Charlotte – Piedmont Research Station, Salisbury.

Tuesday, Feb. 7, 10 a.m. to noon – Food Entrepreneurs Round Table, Triangle/Raleigh – Donald W. Eaddy Agronomic Laboratory, Raleigh.