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Home Business Tax Saving Guide
All small business owners can save money by becoming familiar with their tax deduction entitlements. Working from home or starting a business from home can be a major undertaking and knowing your tax advantages is essential. This article shows what you can claim on and how to qualify.
All expenses you claim should accord with the Internal Revenue Service's Code 162 that states, "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". This of course includes basic expenses such as rent, office supplies and electricity but even health insurance expenses can be tax deductible.
To qualify for home based business tax deduction you must have a room within your home that is allocated solely for business use, it must be used regularly and it must be your main place of business which means you should run the business from there and not have another office elsewhere. Be prepared for a visit from an auditor by making sure that you have records of all expenses.
You can claim up to 50% of the costs of entertaining business clients, bear in mind that you can't include any payments to relatives and always make sure that any expense claims made are reasonable. If you're leasing business equipment then the full amount of each monthly lease payment is also tax deductible. Whether you file your business as a sole proprietorship, partnership, or corporation can have a definite impact upon the tax breaks you get. The Department of Revenue should be able to provide you with listings of fees and available tax breaks for these different classifications of business.
As a home based business owner you can get tax breaks on the following in addition to those already mentioned above: a portion of your home property taxes, mortgage interest and home repair expenses; vehicle costs including fuel, depreciation and repair; any franchise expenses or fees; advertising expenses can be written off; business phone line and Internet expenses can be written off; bounced checks and bank fees can be claimed; computer purchase cost including 3 years depreciation; postage and shipping costs.
In summary, by keeping track of every dollar spent and by careful record keeping you can realise a large overall tax deduction as a home business owner. Software such as "TurboTax Home and Business" (http://turbotax.intuit.com/) is available to help you calculate your tax deductions and it will even uncover more than 350 tax saving opportunities.
By John Kirkham
All expenses you claim should accord with the Internal Revenue Service's Code 162 that states, "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". This of course includes basic expenses such as rent, office supplies and electricity but even health insurance expenses can be tax deductible.
To qualify for home based business tax deduction you must have a room within your home that is allocated solely for business use, it must be used regularly and it must be your main place of business which means you should run the business from there and not have another office elsewhere. Be prepared for a visit from an auditor by making sure that you have records of all expenses.
You can claim up to 50% of the costs of entertaining business clients, bear in mind that you can't include any payments to relatives and always make sure that any expense claims made are reasonable. If you're leasing business equipment then the full amount of each monthly lease payment is also tax deductible. Whether you file your business as a sole proprietorship, partnership, or corporation can have a definite impact upon the tax breaks you get. The Department of Revenue should be able to provide you with listings of fees and available tax breaks for these different classifications of business.
As a home based business owner you can get tax breaks on the following in addition to those already mentioned above: a portion of your home property taxes, mortgage interest and home repair expenses; vehicle costs including fuel, depreciation and repair; any franchise expenses or fees; advertising expenses can be written off; business phone line and Internet expenses can be written off; bounced checks and bank fees can be claimed; computer purchase cost including 3 years depreciation; postage and shipping costs.
In summary, by keeping track of every dollar spent and by careful record keeping you can realise a large overall tax deduction as a home business owner. Software such as "TurboTax Home and Business" (http://turbotax.intuit.com/) is available to help you calculate your tax deductions and it will even uncover more than 350 tax saving opportunities.
By John Kirkham
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