When it comes to running your own home business, there are many tax advantages that you may not have thought of. And if you're good about keeping records and receipts, you can claim many different items legally.
Of course, you want to make more profits than you do deductions, but don't cheat yourself out of these tax advantages.
The home office deduction
When it comes to your home business, you can find a great tax deduction for the space in which you work. This can mean that a part of your home expenses can be deducted for using that space as well.
While the IRS has a more detailed version of these facts, it basically boils down to the fact that if you have an area in your house that is used only for your business, you can deduct the expenses that support that area.
Of course, the area must be the only place that you do business and must not be used for any other purpose. Setting aside a room for your office is the best way to regulate this deduction.
Office related deductions
And of course, within your home office are a lot of opportunities to add further deductions. If you need to make repairs or improvements that are necessary for your business, these are deductible.
Whether you have a mortgage or a rental payment on your property, you can figure out an appropriate deduction. Find out how much space your home office takes up in relation to the rest of the home. For example, if your office takes up 20% of your home, then you can deduct 20% of your rental payment or mortgage interest.
The same rule applies for property taxes as well.
If you own your home, you will need to figure in depreciation costs to this figure.
And there are still more tax advantages for the home-based business.
You can deduct for transportation that is necessary for your business at a certain amount per mile. Check with the IRS for the most current figure.
If you need security for your business, then that too may be deductible as well as insurance. Insurance is deductible at the same percentage as the mortgage interest payments if you carry homeowner's insurance.
And don't forget about moving expenses, entertainment expenses for clients, utilities (at that same percentage) as well as tax preparation expenses. All of these can be deducted from your overall profits when you go to pay your taxes.
One thing to note is that a lot of small business owners are afraid to take these deductions because they think that they will be audited. But if you're careful about keeping receipts and not deducting anything out of the ordinary, you're well within your rights as a home-based business owner.
A home-based business not only offers you the change to be working for yourself, but also a few tax advantages along the way. Talk to the IRS to see what deductions are new each year and cash in!