Here’s the trick every startup must master: Take every opportunity to reduce your tax liability by deducting “ordinary and necessary” expenses associated with your business. Some particulars:

Travel
Combine business and pleasure to deduct otherwise personal expenses. If on a family vacation you attend a business conference, deduct airfare for family members who attend the conference. If your spouse is uninvolved in the business event, you can’t deduct that ticket.

If you would pay the same for a room alone as for one for you and your spouse, you can deduct that cost, but only for the period you’re attending the conference, not afterwards if you hang around to visit Uncle Herbert.

If you rent a car for the conference, it’s deductible. But not the portion for driving to Uncle Herbert’s.

Meals and entertainment
Deduct 50 percent of meals and entertainment if you discuss business before, during or afterwards. You need to record:

1. Date
2. Location
3. Amount spent
4. Who attended
5. The business purpose

If the meal costs less than $75, you don’t need a receipt. One catch: the expense can’t be “extravagant,” but the term is undefined. Just don’t over-do it.

Publications
Deduct the cost of books and magazines that serve a business purpose. They might be pertinent to your profession. Or they can be used as waiting room reading material for clients.

Vehicle expenses
Mileage for visiting clients, customers and business meetings is deductible. Going to the office supply store also counts. You need to log trips noting dates, miles driven and their purpose.

Choose between the standard rate of 36 cents per mile for 2003 or the actual expense of gas, oil, tires, repairs, maintenance, insurance and registration. (Usually mileage is the higher deduction.) You can’t switch from one to the other midyear.

Health expenses
For the self-employed or S corporation shareholder, 100 percent of health insurance and qualified long-term care premiums for yourself, spouse and dependents is deductible—but only if you and your spouse are ineligible to participate in an employer-subsidized plan.

Hire the family
Sole proprietors or spouses who are the only principals of a partnership or limited liability company can save on federal income and state unemployment taxes by hiring their children. You are relieved from withholding income taxes and paying payroll taxes, including Social Security, until a child turns 18. Also, you need not pay federal unemployment taxes until the child turns 21.

You can hire your spouse or parents and not pay federal unemployment taxes on them, but you must withhold federal income tax and pay FICA.

Tip: Take advantage of their lower tax bracket by spreading income over family members.

Caution: Compensation must be reasonable for services provided.

Childcare
Take up to a $4,800 childcare credit by hiring your spouse for the full amount of childcare as a fringe benefit. You can deduct the total as a business expense, and it’s nontaxable for your spouse.