Tax_Advantages_Of_The_Home_Based_Business

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Tax Advantages Of The Home Based Business


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Summary:
Owning and operating a home based business has many advantages and benefits over working at a regular 9-
5 job. There is always the simple pleasure of just being at home in addition to the above average income the
self employed usually bring in. One consideration that you may not have fully explored is the qualifying
deductions you can make on your tax return.


Home Office Deduction


Your office at home and related expenses are allowed deductions according to IRS guidelin...



Keywords:
home based business tax deductions,home business tax write-offs,tax incentives work at home



Article Body:
Owning and operating a home based business has many advantages and benefits over working at a regular 9-
5 job. There is always the simple pleasure of just being at home in addition to the above average income the
self employed usually bring in. One consideration that you may not have fully explored is the qualifying
deductions you can make on your tax return.


Home Office Deduction


Your office at home and related expenses are allowed deductions according to IRS guidelines. To qualify,
your home must be the primary place where your business is conducted. Additionally, the office space must
be used exclusively for your business. It is best to have a room that is obviously equipped for business use
only. Should a question arise, there must not be any doubt that the room is used for other purposes. Needless
to say, keep the day bed in another room.Details of what qualifies as a home office and what can be
deducted is explained more fully in various IRS publications found on their website at http://irs.gov


Home Office Building Expenses


You can deduct home office improvements and repairs. So, if you were to paint your home office, it is
considered an expense associated with conducting business from your home and it is deductible.You can
also deduct mortgage interest as a percentage of the full mortgage paid on your home. Lets say if your home
office takes up 100 square feet of your 1,000 square foot home, you could deduct up to 10% of the interest
on your home mortgage as a business expense. This also applies to those who rent. Property taxes paid for
your home also qualify at the same percentage rate as the mortgage. Home owners can also depreciate a
percentage of the home over 39 years. Home expenses that are not related to your business cannot be
deducted.


Utilities


Using the same percentages, you can also write off utilities such as electrical, gas, etcetera.


Phones and Communications


The IRS considers the first phone line in your home to be personal. Additional lines for business use
including a cell phone are tax deductible. Internet service fees are deductible as a percentage depending on
its business use.


Security


A percentage of the secured home area and its security costs are deductible as a business cost.


Moving Expenses


Form 8829 titled Expenses for the Business Use of Your Home is where you would claim moving expenses
related to your business. Again, if 25% of your belongings were business items, that percentage can be
written off as a business expense. Unfortunately, a C corporation cannot claim this deduction.


Software


Any software that you purchase for business use can be deducted. You will probably be required to write off
over a period of time programs that are over $500 in value though. Check with IRS guidelines for further
information.


Insurance


The premium you pay on your home owner's insurance is partially deductible. Any insurance that covers
your business specifically can be deducted as a cost of doing business. An incurred loss not covered by
insurance can be deducted fully or partially depending on its' use.


Tax Preparation Expenses


You might be able to deduct the cost of having your taxes prepared even though it may not be specifically
about your home based business. Any software that you purchase to help you prepare your taxes for your
business may also be deductible.


Retirement Account


Contributions to a self employed retirement account may also help reduce your tax liability. Inquire with a
qualified specialist like a CPA to determine current laws regarding this special benefit.


Educational Expenses


Any monies spent on learning skills that are specific to your home business are usually tax deductible. If you
purchase a course in gift basket making for example as a precept to starting your gift basket home business,
that would be tax deductible.


Transportation


You can write off transportation expenses related to your business. Traveling to and from a clients place of
business, for example, would qualify. The IRS allowed 37.5 cents per mile for the 2004 tax year. You must
keep detailed records though. A journal kept in your car with odometer readings should suffice.


Meals and Entertainment


If you entertain while conducting business even if it just over a meal it is deductible. While you can only
deduct 50% of the cost of meals and entertainment, it is well worth keeping records. Additionally, you can
deduct your meals if you are conducting business out of town. Please remember to stay within IRS
guidelines to avoid awkward questions later.


Summary


Most home businesses do not take all the deductions that they are legally entitled to mainly because the idea
of an audit is so fear invoking. Just stay within the IRS guidelines, keep receipts and accurate records. If you
have any questions or doubts, call and ask the IRS. You can also consult with a tax preparer to help you
discover, implement, and plan on what deductions you can legally take.


Remember, tax deductions are a way to foster the growth of your business. Take advantage of your legal
right to legally minimize your tax liability, your home based business will be glad you did.




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