Find out how to compute the overall effect of a business expense without using a complex tax calculator.

Small business owners are often under the wrong impression about how their spending affects their final tax bill. When you pay for a business expense, it's not a dollar-for-dollar tax reduction.

Example: Let's assume you typically owe $5k in taxes every year. You spend $1k on marketing. The $1k does not reduce your final tax bill by the same dollar amount.

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Remember, this is a very rough estimate but a good indicator of what you can expect.

Example: Based on our previous fact pattern, the $1k marketing expense would help reduce your final tax bill by approximately $240 which means you would have a $4,760 tax bill.

TIP: An expense has to be large for it to reduce your tax bill dramatically.