Taxes You can deduct on Schedule C or C-EZ various federal, state,and local taxes directly attributable to your business. Income taxes.ERROR MSGYou can deduct as a business expense on Schedule C or C-EZ astate tax on gross income (as distinguished from netincome) directly attributable to your business. You can deduct anyother state and local income taxes if you itemize deductions onSchedule A (Form 1040). Do not deduct federal income tax. Employment taxes.You can deduct the social security, Medicare, and federalunemployment (FUTA) taxes you paid out of your own funds as anemployer. Employment taxes are discussed briefly in chapter 1.You canalso deduct payments you made as an employer to a state unemploymentcompensation fund or to a state disability benefit fund. Deduct thesepayments as taxes. Self-employment tax.Lyon hôtelsYou can deduct half of your self-employment tax on line 27 of Form1040. Self-employment tax is explained in chapter 1. Personal property tax.You can deduct on Schedule C or C-EZ any tax imposed by astate or local government on personal property used in your business. Registration fees for the right to use property within a state orlocal area are also deductible as a business expense. Example.Lugano Hotel de lujoMay and Julius Winter drove their car 7,000 business miles out of atotal of 10,000 miles. They had to pay $25 for their state licensetags and $20 for their city registration sticker. They also paid $235in city personal property tax on the car, for a total of $280. Theyare claiming their actual car expenses. Because they used the car 70%for business, they can deduct 70% of the $280, or $196, as a businessexpense. Real estate taxes.You can deduct on Schedule C or C-EZ the real estate taxesyou pay on your business property. Deductible real estate taxes areany state, local, or foreign taxes on real estate levied for thegeneral public welfare. The taxes must be based on the assessed valueof the real estate and must be charged uniformly against all propertyunder the jurisdiction of the taxing authority. For more information about real estate taxes, see chapter 9 inPublication 535,Business Expenses. That chapter explainsspecial rules for deducting the following items. accommodation in BathTaxes for local benefits, such as those for sidewalks,streets, water and sewerage systems. Real estate taxes when you buy or sell property during theyear. Real estate taxes if you use an accrual method ofaccounting. Sales tax.Treat any sales tax you pay on a service or on the purchase or useof property as part of the cost of the service or property. If theservice or the cost or use of the property is a deductible businessexpense, you can deduct the tax as part of that service or cost. Ifthe property is merchandise bought for resale, the sales tax is partof the cost of the merchandise. If the property is depreciable, addthe sales tax to the basis for depreciation. See Publication 551,Basis of Assets, for information on the basis of property. Caution: Do not deduct state and local sales taxes imposed on the buyer thatyou must collect and pay over to the state or local government. Do notinclude these taxes in gross receipts or sales. Excise taxes.You can deduct on Schedule C or C-EZ all excise taxes thatare ordinary and necessary expenses of carrying on your business.Excise taxes are discussed briefly in chapter 1. Table 8-1 Fuel taxes.Taxes on gasoline, diesel fuel, and other motor fuels that you usein your business are usually included as part of the cost of the fuel.Do not deduct these taxes as a separate item.