Business travel.
If you travel on business away from home, you can deduct the cost of transportation, lodging, food (50%), and other related expenses, such as dry cleaning, business telephone calls, and tips. If you decide to tack on some sightseeing (i.e., part of the trip is a pleasure), only the business portion of the trip's total cost is deductible. You can deduct all your airfare as long as more than 50% of the trip was for business purposes.

If you must stay overnight on a Saturday to qualify for a reduced airfare, take advantage of this savings because the extra night of lodging also is deductible.

Travel vehicle expenses.
For many business owners, the cost of using a car for business provides a substantial tax break. You probably know that when you use your car for business, the IRS allows you to either 1) deduct your actual costs for gas, oil, tires, repairs, and maintenance, or 2) use the standard mileage rate method.

If you lease a car and use it only for business, your entire lease payment is deductible. Generally, you can deduct the portion of each lease payment that represents your vehicle's business use. However, if your tastes lean toward a more expensive car, there is a price you'll pay. The IRS does not intend to underwrite the cost of high-priced cars, so you'll have an inclusion amount, which is simply an amount added to your other income. This is because there is a dollar limitation on the amount of depreciation claimed on so-called luxury cars. The inclusion amount helps to level the playing field between owning and leasing a vehicle.

Bad debts and obsolete inventory.
When you are in business, you're going to lend money or extend goods and services to someone and not get paid. That is why there is a deduction for bad debts. For an accrual method business, you may be able to deduct uncollectible account receivables. To do so, you must show that the debt has become worthless and that you took reasonable steps to collect the money owed, which might include making written demands for the money or reporting the debt to a collection agency. But be careful! You only can deduct a bad debt in the year it becomes partially or totally worthless.

Unfortunately, businesses with a cash method of accounting might not be able to recover money owed. If you own a cash-basis business, you must record a sale in income when the money is received. Because you never received the money, the sale amount was never included in your income; therefore, you cannot deduct it from your income.

Example: A freelance artist operating on a cash basis has an overdue invoice of $250. In this case, the IRS does not consider this an economic loss. Although the artist has suffered a loss because he has spent time and energy providing a service, the IRS does not think so from a tax standpoint.

Obsolete inventory - goods that cannot be sold at normal prices or in the usual way because of changes in style or damage - may be valued for deduction purposes at bona fide selling prices, less the disposition costs.

Business gifts.
Gifts given by a business to its customers are tax-deductible as long as they are business-related. Like entertainment expenses, a gift must be presented with the expectation of deriving a profit (although you need not actually profit from every gift to qualify for a deduction). There is a spending limit: Tax laws allow you to deduct up to $25 per year per individual. You also can deduct the cost of engraving, wrapping, and mailing or shipping a gift.