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How to barter for your small business

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SmallBusiness.com How-tos are step-by-step instructions for specific small business tasks. They are created and edited by readers like you. You can help edit this How-to or you can create your own. Find more How-tos at the SmallBusiness.com How-to Hub.

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You don’t always need cash to get the products and services you need to run your business. Bartering is another option.

But bartering is more complicated than simply trading services with another small business. Keep good records of all barter transactions and take care to adhere to the tax guidelines. Yes, exchanging goods and services is taxable—even when no actual money is exchanged. In fact, you report barter transactions on your income tax return just like you report income. A barter transaction that involves an exchange of services is generally reported on Schedule C or C-EZ of form 1040. However, reporting barter transactions is case-specific.

Before you barter, make sure you research how your transaction will be taxed. For example, the owner of an apartment building who exchanges free rent for goods received should report the barter as rental income on Schedule E, which is different from other types of bartering.

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