How confusing is the tax code? So incredibly confusing that you can actually claim a deduction for the taxes you pay to one tax agency, but not another. In this case, we are talking about what tax payments businesses can deduction on the federal tax returns. The simple answer is you can deduct some of the state and local taxes you pay through the year. Let's take a closer look at small business owners that figure their tax on Schedule C.

1. If your state and/or local government collect income tax from your small business, you can deduct the amount that is attributable towards your business effort on Schedule C. Other state and local taxes have to be deducted on Schedule A, but only if you itemize.

2. Employment Taxes ? If you have employees, you know the joy of paying employment taxes. Well, you get to deduct them once it comes around to tax time. Specifically, you can deduct social security, unemployment and Medicare taxes you actually paid on employees.

3. Self-Employment Tax ? The self-employment tax is a whopping 15.3 percent. It can be an ugly surprise if you are not ready for it. Fortunately, you get at least some relief with a deduction. Yep, you can deduct 50 percent of your self-employment tax on line 27 of Form 1040.

4. Personal Property Taxes ? If your state collects a property tax on personal property you also use for business purposes, you can claim a deduction. The deduction is equal to the amount of the tax times the percentage of the time you use the property for business.

5. Real Estate Taxes ? If you own real estate used for your business, to wit, your own office building, you can deduct state and local real estate taxes. Such taxes, however, have to be based on the assessed value of the property.

Depending on your business, there may be other deductions you can claim for state and local fees. Issues such as excise taxes and disability fund contributions can be complex, but worth checking out to save a few bucks.