Owning Your Own Home Business -10 Reasons to Look Forward to April 15th
Owning Your Own Home Business -10 Reasons to Look Forward to April 15th OK, no one really likes tax time, but, owning your own home business can make April 15th a bit more enjoyable if you know how to save money on your taxes. There are many legitimate business deductions allowed by the IRS for the home business entrepreneur the key is knowing what they are and what you need to do to claim them.
Sandy Botkin, CPA and former IRS attorney, says "If you do not have a home based business you are loosing money." The tax advantages to a properly formed home business and not a hobby are worth your time and efforts.
It should go without saying that all business deductions should be reasonable and necessary. And to prove those claims you must keep accurate books and records. If the IRS where to audit you they would be looking for such items as sources of income, detailed expenses, bank statements, credit card statements and all receipts for purchased items and services rendered.
The more deductions your business can legitimately take, the lower its taxable profit will be. Here is a simple example: if you earn $100,000 per year from your job and home-based business, combined, but have $15,000 in allowable business deductions from your business, you would only pay taxes of your net income of $85,000. At 30% tax rate, that could save you $4,500 in federal taxes!
Proper logging of all business related travel will help you reduce your yearly auto expense. You will need to track the date, purpose of the trip, and round trip mileage. These few extra steps will save you money on gas, yearly upkeep and insurance costs.
Education / Training Expenses
All home business owners need to keep on top of their industry or may need to update their computer skills. Cost for seminars, online training programs, books, e-books, professional memberships and subscriptions are all deductible. You can even deduct those fees from your lawyer and tax professional.
Does your home business require you entertain clients? If so, you can deduct a percentage of those costs directly related to the business. Keeping good notes on this activity, jotting down who was their, what was discussed and making certain that business activity was foremost, will ensure the acceptance of this claim by the IRS.
How would you like to have your vacations paid? The IRS allows you to combine business travel with pleasure provided your primary purpose for the trip was for business. You can deduct such expenses as your plane fare, operating cost of your car, rental cars, taxis, lodging, meals, tips, dry cleaning, telephone calls, faxes, well you get the idea. However, this will not include expenses for family members if they accompany you, unless they work for you!
All expenses involved with advertising or promoting your business are deductible. For example, business cards, classified ads, brochures, flyer's, posters, t-shirts are just a few.
Interest on credit cards and business loans are fully deductible.
Computers and Software
Is your business done on the computer? Do you need software to operate your business? Do you need to connect to the Internet? These rules can change based on the business model so be sure to check with your account for your industry.
Part of being a model citizen and business owner is to give back to your community. Charitable contributions are allowable. Again you should consult with a professional on what you can take based on your business structure.
This is one of the most valuable deductions. If you use a percentage of your home, say a den or the basement "exclusively" this will qualify you for this deduction. You can save on your utility bills, phone bills, maintenance; even a portion of the interest you pay on your home is deductible.
These 10 tips only scratch the surface of the tax benefits owning a home business provides. As always it's important to consult with a CPA or Tax Attorney to ensure you are taking the proper deductions and getting all you deserve. Keeping those hard earned dollars in your pocket and out of Uncles Sam's is to your benefit.
About the Author:
Bob and Cindy are both home based business entrepreneurs with 15 years experience in owning Real Estate and Network Marketing businesses. You can own your own business today that provides residual income for your future. To learn more about how you can secure your financial future... Go to: www.ThingsLookGreatIn2008.com For advice and strategies on building success with your online business visit our blog at www.blog.bobandcindyfloyd.com
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