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10 Oddball Tax Deductions

Updated for 2011

Self-Employed Individuals:

The deduction limits for employees also apply to self-employed persons.

However, self-employed persons must perform a special computation to figure their maximum deduction for contributions made to their own SEP-IRA.

For employees, the most you can deduct is the lesser of:

Your contributions (including any excess contributions carryover) or
25% of the employee's compensation not to exceed $49,000 per participant for tax year 2011.

Note: The compensation you may consider for SEP contributions is limited to $245,000 in 2011.

Self-Employed Persons:

Contributions for yourself are deducted on:

Employees:

Contributions made for employees are deducted on the business tax return:

Sole proprietorships use Schedule C
Partnerships use Form 1065
C-corporations use Form 1120
S-corporations use Form 1120S
LLCs use Form 1065 unless an election was made for the entity to be taxed as a corporation. In which case, Form 1120 or 1120S would be used.

You have until the due date of your return (including extensions) to set up a SEP plan and make deductible contributions.

SEP Plans: Deductible SEP-IRA Contributions; Special Computation for Self-Employed Persons