Can You Really Save Money By Owning A Home-Based Business?
It’s tax season and many people don’t understand that having a home-based business can really save you money.
A few years ago during tax season, I was talking to a friend and he mentioned that he had to pay the government additional money…a fear that most of us have. Most people hope and pray they get a refund and that we don’t have to pay more to the IRS!
I remember those days! It never dawned on me that it could be any other way until I started a home-based business and learned how to save money with home-based tax deductions.
I was also recently shocked by the number of people who own home-based businesses, but don’t take advantage of the many tax breaks and write-offs available to them. That really blew my mind! Hopefully, this will help you if you haven’t filed yet for 2015 or at least, understand what needs to be done for 2016!
Starting A Home Based Business
When I started my work-from-home business and told my accountant, he immediately clued me in on how much money I could save! I really liked the sound of that and in the past 7 or so years as a home-based business owner, I have received money back every year!
The thing is even if you lose money on your business, those losses can be written off, possibly allowing you to get money back from those losses! That’s pretty awesome when you think about it!
Maybe you haven’t filed your taxes yet so this info will help you immediately before the deadline for 2016 OR maybe you’ll find it helpful for next year. I think it’s really important to help people understand how much they can save by owning a home-based business.
It’s not too late to start looking at your deductions, tax breaks, and potential write-offs and saving your receipts for the rest of this 2016 year if you’ve already filed your 2015 taxes! Every dollar counts, so if you find yourself working from home, take advantage of them. As a matter of fact, if you have filed for 2015 you might want to go back and re-file.
You can read more on re-filing for previous years taxes here. https://www.irs.gov/uac/Nine-Facts-on-filing-an-Amended-Return
Understanding Home Business Tax Deductions!
So what are some of the tax deductions for owning a home-based business? Besides the convenience of having a room in the house which can be used as office space; auto and commuting costs; supplies, etc., I have been able to use a number of home based business tax write-offs.
What Can You Claim On Home Business Tax Deductions?
1. Your Office Space
A great deal of the expenses I claim are related to the space I use in the course of my work at home business. Your ‘business’ space should be defined, i.e, where you work and the approximate space (size) of your defined workspace. That is your office.
All items related to maintaining ‘that space’ can be a tax write-off for your business.
- The cost of maintaining your business office space (may include heating in the winter or air in the summer – check with your accountant).
- Check to see if you can include the cost of homeowner’s insurance and maintenance as well (always for your designated ‘office space.’)
Ask your accountant what percentage of your home can be utilized as a tax deduction, including rent or mortgage payments, insurance (homeowners or renters) and utilities.
2. Office Supplies
Home business tax deductions can also include the cost of your computer or laptop, monthly cell phone expenses for business calls, land line phone, pens, paper for printing, monthly internet costs, iPads, or any electronics you may need for your business. Any items you purchase to use for business, like credit card machines, apps, etc.
3. Monthly internet costs which can include:
- Monthly cell phone if used for business. (Should be associated with a business account with telephone service provider.)
- Internet costs
- Monthly landline if used for business
- Monthly or Yearly fees for URL for your blog
- Yearly or monthly Domain Names
4. Supplies and Miscellaneous
- Cost of business supplies (paper, cartridges, pens, copying) etc.
- Mileage or traveling (flights, rental cars, hotels if associated with a business tip)
- Car depreciation
- Any other equipment or supplies needed to conduct my business.
5. Additional Home Business Tax Deductions
Do you spend money promoting yourself by attending seminars and conferences? Do you advertise on Facebook or other social media or Google? Do you use various tools for marketing? Do you use tools or apps to grow and manage your twitter account?
Did you register your business as an official business entity? Do you have insurance for your company and did you pay for that insurance? These are legitimate business expenses/write-offs to be included in your taxes when you file.
Course Work: Have you enrolled in any courses related to your business such as how to build a website? Training can be included as well.
Don’t forget hosting fees for your website or purchasing domain names?
Did you know that if you do a Give-A-Way, that is business write-off and should be documented as a tax write-off?! Why? Because you have paid for it, invested, and provided it to a client as a gift. If you gained no profit from it, it is a loss that is written off as such. If you sell something, then you also have to document your profits.
Profits and Losses
All profits and losses should be documented.
Save every receipt that is related to your business including the ones where you take someone out to lunch, dinner or a drink to discuss the business venture. One bit of advice: keep copious records and receipts for all your tax write-offs.
The best method is to use the government authorized mileage allowance that currently is about 50 cents per mile as you travel to meet clients. This seems to change yearly so check with your accountant what the rate if for the year.
If you have purchased any software or tools for your business or have had repairs done on your equipment be sure to keep track of these items as well.
Begin Setting Up Now For Your Home Business Tax Deductions!
To begin right now, create an Excel spreadsheet and insert the following categories to get you started and begin tracking your expenses or email me for a FREE copy of the spreadsheet I use. Some typical categories are Meals, Entertainment, Supplies, Travel, Mileage, Auto, Rental Space of home, Utilities, and Gas.
You will and can save money if you are in a home-based business! Whatever deductions you choose to utilize, it is always wise to consult with a tax authority, as tax regulations can change without notice.
If you do your own taxes, but own a home-based business, I highly recommend working with an accountant who can make sure you get all the deductions you are allowed! It is well worth it, I promise.
I hope this information helps. Please feel free to leave a comment if you found this helpful or need additional inform. Good luck in this upcoming year!
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Barbara Charles
To enhance the lives of those I touch by helping people reach their goals in health and green living. I can aid you with natural health, natural products, and a safer nontoxic home and life.I work with breakthrough innovations to naturally and effectively reduce weight, increase nutrition, and advance health.
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