you are correct. A business owner can do itemized deductions and bring down the taxable income. the example I gave is what a non-itemized return would look like, just to show how the different taxes would impact the business. Also, the same rules would apply anyway.
However, for your claim that the owner(s) income will not push them into a higher tax bracket to work the operating cost will have to be represent over 80% of the revenue. Which would not usually be the case.
Also, if the payroll expenses are different. There are still taxed albiet at about half the income tax rate for SS and Medicare. I calculated this worng so I'll change that.
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