Work From Home Business Tax Advantages
Important: It is important to stress that unless you have either the prior knowledge or the desire to take the time to learn – you must visit a professional. Use the Google Search near the top of this page to search [Tax Preparation in Mytown, Mystate] replacing Mytown, Mystate with your own!
So, you may have heard…
One of the biggest advantages to owning a home business is the tax savings you can receive and if you didn’t know it already – you have a tax expert on your side!
I have years of experience in preparing, advising, training, and managing tax returns. I also am an IRS Enrolled Agent which means I passed a comprehensive exam on the tax code (yes, its long!) and can represent clients in audits and collections and hold power of attorney status for taxes just like a Certified Public Accountant (CPA).
As the next tax season nears our work from home website will contain more and more information on taxes. However for now let’s look at what you can take advantage of:
- Home Office Deduction
You can write off all direct costs (anything SPECIFIC to your office – such as having to repair a broken window).
The real savings though come from indirect expenses. This is figured by calculating what percentage of your residence you use primarily and exclusively for business. You will be able to deduct this percentage as a business expense.
Here are some common direct and indirect home office expenses:
- Rent or Mortgage Interest
- Real Estate Taxes
- Utilities
- Repairs and Maintenance (Such as cleaning supplies)
- Casualty Losses (Theft and Damage)
- And more!
- Mileage Expenses
Many times as a tax preparer I was asked by a typical employed worker if they could deduct the mileage from their home to their place of employment. In this basic situation – the answer is no. You cannot deduct what the IRS calls “Commuting Miles”.
However, if your primary place of business is your home – any business related mileage is deductible!
- Buying office supplies
- Going to the post office
- Visiting tax preparer
- Meeting clients
These are only a few examples of typical tasks you may do – and they are all deductible! Keep a record that includes the dates, times, number of miles, and purpose for the trip. It is okay to use things like MapQuest and Google Maps to get approximate mileage.
There are a host of expenses that you are entitled to deduct. Below is just a glimpse.
- Advertising (Including Business Cards and Websites)
- Commissions and Fees (Such as bank charges)
- Contract Labor (If you pay someone for extra help)
- Depreciation and Section 179 Expenses (To deduct big, expensive purchases like computers and furniture that last a long time)
- Insurance (Health Insurance, Business/Liability Insurance)
- Interest (Mortgage, Loans, and more)
- Legal and Professional Services (Lawyers, Tax Preparation, and more)
- Office Expenses (All your pens, paper, computer ink and paper)
- Pension and Profit-Sharing Plans (Contribute to various retirement plans and obtain tax deductions and credits!)
- Rent or Lease (Property)
- Repairs and Maintenance (Including cleaning supplies)
- Supplies (Materials used to produce product or service your business sells)
- Taxes and Licenses (Any fees you encounter in business)
- Travel, Meals, and Entertainment (Conventions!)
- Utilities (Often a telephone bill)
- Wages (If you have any employees – You may even be able to deduct wages paid to your children under 18!)
All of the tax advantages you may be used to in the “regular workforce” are still available – including benefits for having children, tax credits for low and moderate income earners, and even the childcare credit!
Please visit my Tax Cruncher Blog: Work From Home Tax Saving Advice and Tips for more advice and information about work from home taxes!
Post your questions, comments, and thoughts before in the comments section!
