There are a lot of benefits to owning a home-based business. Everybody knows that leaving the mainstream work force, working for yourself, setting your own schedule and being in control of your own financial destiny are common reasons for launching your own business. However, many people don’t know that there are various other benefits in the form of taxation savings.
Just about everything that you do from your home when you’re running a business becomes taxed deductible. The expenses necessary to run your business always have a substantial degree of overlap with the expenses necessary to run your home. You can get partial tax credits for expenditures such as: rent, electricity, telephone service, Internet service, property taxes, and insurance for your home. Even the expenses you incur for maintenance and repair are able to be deducted.
You see, a home-based business is it a legitimate business in every sense of the word. If you owned and operated a brick-and-mortar business, you would be able to deduct the same expenditures listed above. When you run your business from your home, the government will still reward you for being a private entrepreneur in the form of a range of tax deductions.
Now, you can’t deduct 100% of your expenses; you have to determine the amount of your total home expenses that are business directed. A way that you can calculate this is to figure out the ratio between a total square footage of your home and the square footage used to operate the business in the home. For instance, if your home business office comprises 10% of your home’s total living area; you would be entitled to deduct 10% of your heating bill in the name of your business.
There are further available deductions as well. You have the right to deduct expenses incurred for meals and entertainment related to business reasons. Also, you may deduct the expenses for business travel, office supplies, advertising costs and other expenses such as computers, printers, etc. You’re also entitled to deductions if you employ your spouse or children from your home-based business.
As with everything having to deal with the IRS, there are specific rules and regulations that you’ll have to comply with. These rules and regulations are also often location dependent. You will need to check with your local governmental agencies to ensure your compliance.
Here’s a list and helpful tips to help you maximize your taxation deduction potential:
1) Save your receipts. You’ll be amazed at how quickly the numbers add up for purchases such as gas, food, office supplies and utilities.
2) The IRS loves well-kept records. Always keep close accounting of your expenditures. If there is ever a challenge by the IRS, your records will be like gold to you.
3) Develop a system of keeping your receipts and records organized and easily assessable. They can quickly become an unsorted mess.
There are a lot of benefits to operating your business from your home. Explore the potential for taxation deductions today and begin saving!