small business articles business management businesses Marketing sales Technology Business finance Lean Manufacturing small business Investing articles employee health

Income tax deductions for home-based small business owners

figures19082355.jpgWorking from your home definitely has its advantages.You benefit from being your own boss and from being able to spend more time at home because there is never a commute to the office.Of course working out of your home is not without its drawbacks, but there are plenty of advantages that make running your small business from home a good choice.One such benefit comes at tax time.There are income tax deductions for home-based small business owners that can decrease how much you owe the government.

The first thing that you need to do is to make sure that your home-based business qualifies for the deductions that are out there, because not all of them will.Also, realize that it will take additional time, documentation, and paperwork to get all your deductions included.The effort can definitely be worth the savings especially if you think of all the possible deductions that exist.You may be able to deduct such things as business expenses for your car, personal equipment, and entertainment, as well as a portion of mortgage interest, property taxes, utilities, and other costs associated with homeownership.

The first thing that you need to do as you start adding up income tax deductions is to first make sure that you need to worry about business expenses in the first place.If what you do out of your home is more of a hobby than a business, the IRS isn't going to cut you any breaks.As a general rule, consistently producing income is what separates a hobby from a business.If you have been making a profit as a result of what you do, chances are that you have got a business on your hands.

Now let's start talking about the deductions.Deducting automobile expenses can really help out come tax time if you travel a lot for your business.You may be able to claim a deduction that is equal to a certain cent value per mile.This cent value per mile may change from year to year although it is usually somewhere around the 37 cent per mile mark.In addition to being able to deduct the cost of gas, you may also be able to include other qualified expenses like the cost of oil, parking, depreciation, tolls, and other maintenance costs.There are also expenses like entertainment and meal expenses that you might incur as part of doing business.You can deduct up to half of these expenses if your expenses were charged during a qualifying business interaction.There are specific accounting methods that must be used in order to claim these deductions.If you find that all the calculations are becoming too much for you to calculate and differentiate on your own, you may want to hire an accountant to prepare your taxes.After all, you don't want an audit to show that you were off with your figures.

Every year there is a certain dollar amount that home-based business are allowed to deduct for equipment costs.Determining the value of equipment including the depreciation that takes place is a process.What many business owners choose to do to make things a little easier on themselves is to lease their assets.When it comes time to calculate deductions, you can generally just deduct the entire expense of the lease.
If you spend a good deal of your time and resources working in your home office, you may want to look into the home office deduction.You may qualify to deduct the costs of maintaining a portion of your home.There are stipulations that may exclude you from claiming these deductions so check with your accountant to make sure that you can claim this deduction and that you file the appropriate form 8829 with the IRS.

FREE: Get More Leads!
How To Get More LeadsSubscribe to our free newsletter and get our "How To Get More Leads" course free via email. Just enter your first name and email address below to subscribe.
First Name *
Email *


Get More Business Info
Sponsored Links
Recent Articles

Categories

Copyright 2003-2020 by BusinessKnowledgeSource.com - All Rights Reserved
Privacy Policy, Terms of Use