One of the great things about running a home business can be the low overhead costs. Depending on what you’re doing for income from home, you can usually get away with small expenses. Even better is the fact that there are tax deductions available to you when you have a home business:
Business Use of Your Home
First of all, if you have a dedicated area for your home business, you can deduct its cost. This can be a percentage of your mortgage payment or rent payment. You can even deduct a percentage of your utilities. New rules for deducting your home office on your taxes make it even easier, offering a flat rate deduction. You can consult with a tax professional to decide whether to figure your deduction based on a percentage or based on the flat rate.
Office Supplies and Equipment
You can also deduct the office supplies and equipment that you buy for your home business. It’s important to understand that you need to keep good records, as well as make sure that you use the supplies and equipment only for your business. You aren’t supposed to deduct items that you use for personal purposes as well. Your business tax deductions should be based on what you use in your business.
Insurance Costs
If you are paying for your own insurance as a result of being self-employed, you can deduct some of those costs. I am able to deduct a portion of my health insurance since I pay for that as a result of running my own business. There might be other insurance costs that you can deduct as well. Check with your accountant or other tax professional to determine what costs are tax-deductible.
Trade Association Memberships
Joining a trade association or professional organization can provide you with networking opportunities and other business benefits. If you join an organization related to your business, you might be able to deduct the cost of the membership. Local membership in town that can help you advance your business, such as a membership to the Chamber of Commerce, might also be tax-deductible.
Travel
Even travel can be tax-deductible, as long as you are traveling for business purposes. When you travel to meet with a client or a vendor, or if you travel to attend an industry conference, you can deduct many of your costs. Airfare, hotel costs and even ground transportation costs can be deducted from your business income. It’s even possible to deduct a portion of your meals. In order to make these deductions, you should be sure that you are clearly traveling for business purposes and that you keep the receipts and other records.
You can deduct a portion of business meals that you eat with clients and partners as well. However, it makes sense to keep the receipt and make a record of who you met with and what was discussed. You need to show the IRS that you really have been benefiting your business with your choices.
In the end, it’s possible to deduct quite a bit when it comes to your home business. But, when in doubt, double-check and make sure you have good records.
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