Your Home Based Business Could Be Your Personal Tax Shelter
One of the best reasons to start up a business from home are the extra tax deductions. If you are working a steady job outside of the home or if you have recently been laid off or have become unemployed, right now is an ideal time to begin a home based business of your own.
As a business owner and employer you will receive great tax benefits in the form of deductions and credits. Your home start up business can become your personal tax shelter.
Let’s propose that you are married without kids. You live in an apartment, or you rent a house, or you rent a condo. You have steady, gainful employment. What are your tax deductions? You do not have a mortgage, so there are no interest deductions. You have no children, so you have no deductions related to raising a family.
You are the redheaded stepchild of the American taxpayer system. You are on your own, forgotten when it comes to tax credits and deductions.
What if you are married with children and one of you has decided to stay home and raise the kids, but the single income dollars are not going as far as they did before? Maybe the spouse who has been staying at home is now considering getting back into the workplace instead. But have you looked at the cost of day care? One of you is going to have to work full time just to cover that. Even if you have another means to have the children cared for, you would be unwise not to consider the possibility of working from home.
As a home based businessperson, you have the following advantages, tax wise.
o You can deduct household expenses such as mortgage interest, utilities, and home improvements.
o You can get deductions for hiring your spouse and legal aged children to work for your business.
o You can deduct automobile expenses if you use your car in some aspect of your business. You can even put a small sign advertising your business on your car and write off gas and travel expenses every time you use it.
o Deduct your vacation, if you distribute business cards where you are staying or make business contacts along the road.
o Deduct meals with colleagues, even if they live with you.
o You can deduct part of your phone bill, cell phone bill, and the bill from your Internet provider.
o Any computer equipment like printers, monitors, routers, can be deducted as long as you are using the computer for business.
o Office supply costs like pencils, pens, paper, and the furniture in your office space are deductible.
o Marketing expenses are deductible.
o Deduct the expense for trade journals.
There are other things you can deduct, as well as receive tax credits, for operating your business from home. Look into it and see if a home based business might not be your best job option.
If you are self-employed or operating your business from home, you are perhaps missing out on a lot of tax deductions on your tax return. Know the official and legal ways to claim your expenses to reduce tax liability. Chintamani Abhyankar suggests some hints.