OK, no one really likes tax time, but, owning your own home
business can make April 15th a bit more enjoyable if you
know how to save money on your taxes. There are many
legitimate business deductions allowed by the IRS for the
home business entrepreneur the key is knowing what they are
and what you need to do to claim them.
Sandy Botkin, CPA and former IRS attorney, says "If you do
not have a home based business you are loosing money." The
tax advantages to a properly formed home business and not a
hobby are worth your time and efforts.
Tax Advantages
Business Deductions
It should go without saying that all business deductions
should be reasonable and necessary. And to prove those
claims you must keep accurate books and records. If the IRS
where to audit you they would be looking for such items as
sources of income, detailed expenses, bank statements,
credit card statements and all receipts for purchased items
and services rendered.
The more deductions your business can legitimately take,
the lower its taxable profit will be. Here is a simple
example: if you earn $100,000 per year from your job and
home-based business, combined, but have $15,000 in
allowable business deductions from your business, you would
only pay taxes of your net income of $85,000. At 30% tax
rate, that could save you $4,500 in federal taxes!
Auto Expenses
Proper logging of all business related travel will help you
reduce your yearly auto expense. You will need to track the
date, purpose of the trip, and round trip mileage. These
few extra steps will save you money on gas, yearly upkeep
and insurance costs.
Education / Training Expenses
All home business owners need to keep on top of their
industry or may need to update their computer skills. Cost
for seminars, online training programs, books, e-books,
professional memberships and subscriptions are all
deductible. You can even deduct those fees from your lawyer
and tax professional.
Business Entertaining
Does your home business require you entertain clients? If
so, you can deduct a percentage of those costs directly
related to the business. Keeping good notes on this
activity, jotting down who was their, what was discussed
and making certain that business activity was foremost,
will ensure the acceptance of this claim by the IRS.
Travel
How would you like to have your vacations paid? The IRS
allows you to combine business travel with pleasure
provided your primary purpose for the trip was for
business. You can deduct such expenses as your plane fare,
operating cost of your car, rental cars, taxis, lodging,
meals, tips, dry cleaning, telephone calls, faxes, well you
get the idea. However, this will not include expenses for
family members if they accompany you, unless they work for
you!
Advertising
All expenses involved with advertising or promoting your
business are deductible. For example, business cards,
classified ads, brochures, flyer's, posters, t-shirts are
just a few.
Interest
Interest on credit cards and business loans are fully
deductible.
Computers and Software
Is your business done on the computer? Do you need software
to operate your business? Do you need to connect to the
Internet? These rules can change based on the business
model so be sure to check with your account for your
industry.
Charitable Contributions
Part of being a model citizen and business owner is to give
back to your community. Charitable contributions are
allowable. Again you should consult with a professional on
what you can take based on your business structure.
Household Expenses
This is one of the most valuable deductions. If you use a
percentage of your home, say a den or the basement
"exclusively" this will qualify you for this deduction. You
can save on your utility bills, phone bills, maintenance;
even a portion of the interest you pay on your home is
deductible.
These 10 tips only scratch the surface of the tax benefits
owning a home business provides. As always it's important
to consult with a CPA or Tax Attorney to ensure you are
taking the proper deductions and getting all you deserve.
Keeping those hard earned dollars in your pocket and out of
Uncles Sam's is to your benefit.
----------------------------------------------------
Bob and Cindy are both home based business entrepreneurs
with 15 years experience in owning Real Estate and Network
Marketing businesses. You can own your own business today
that provides residual income for your future. To learn
more about how you can secure your financial future... Go
to: http://www.ThingsLookGreatIn2008.com
For advice and strategies on building success with your
online business visit our blog at
http://www.blog.bobandcindyfloyd.com
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