Business entertainment – You may take a deduction for 50% of the costs of entertaining your customers and clients such as picking up the tab for a business related meal, catering a luncheon, etc. Other often-overlooked deductions in this area are business gifts and giveaways,

Travel expenses – Costs related to traveling for business are deductible: airfare, car rental/taxis, lodging, tips, phone calls, dry cleaning and meals are a few examples. Even if you combine a business and pleasure in a trip, the costs are deductible as long as you can establish that the trip is primarily for business.

Equipment – Some equipment falls under capital expenses and must be deducted over a number of years but you may also be able to deduct the costs of acquiring new equipment, provided it falls under a certain dollar amount as determined by the IRS ($108,000 in 2006).

Interest – Often overlooked by many small businesses, the interest from business purchases made on credit can be deducted. Interest on personal loans for business expenses also qualifies. Be sure to carefully separate and document personal credit purchases from your business credit purchases in order to avoid IRS trouble.

Taxes – While federal business taxes are never deductible, your state tax may be used as an itemized deduction on your federal business return. Your company’s share of employment taxes is also an eligible deduction.

Advertising and publicity – Costs associated with letting the world know about your company are definitely deductible. Print and online ads, business cards and brochures, trade shows and yellow pages ads are common examples.

You may also be able to deduct charitable acts or community support if there is a clear link between your business and recipient.

Examples would be sponsoring a little league team or donating equipment such as computers or vehicles to a non-profit organization (provided you haven’t written off the depreciated value of any used items).