Tax season doesn't have to be a nightmare if you own a home-based business.
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Commonly Filed Home Business Tax Deductions
Tax season doesn't have to be a nightmare if you own a home-based business. As long as you have kept good records of your income and expenses, it can be a time when you cash in and recoup some of the money you lost during the year as a result of repairs, new purchases, and home office maintenance. If filing taxes for your home business is new to you, there are many deductions you might be unaware of that you can take.
In order for your home-based business to qualify as a business worthy of tax deductions, it must meet specific criteria. It must be a room in your house that is used solely for business purposes. If you own a business that requires you to meet with customers, then the room designated as your office should be used. If your business does not require you to meet face-to-face with customers, then the room still qualifies as long as it is used exclusively for running your business and is set up with a desk, computer, telephone, file cabinet, and anything else required. It should be separate from the other rooms of your home, even if it is in a spare bedroom, garage, or basement.
Accurate record keeping is a must if you plan to recoup some of your losses at tax time. Keep records and receipts of every single purchase you make, even the most minor things, such as liquid paper, pencils, pens, and paper. Anything you use for your home business will likely qualify as a valid tax deduction as long as you have a receipt showing the details of your purchase. Even though these small, inexpensive items may not seem like much, they will constitute a significant amount of money once you add them all together at tax season.
You must also keep up with how much money you spend on office furniture and equipment, including desks, chairs, shelving, copiers, fax machines, and the like. These are major purchases and can be very important when filing your taxes because they will help reduce the income you report to the IRS.
Even bills you pay for your entire house, such as utility, phone, and mortgage payments may be partially deductible on your business taxes. You will be able to use a certain percentage of these expenses as deductions for your business.
In order to file phone bills, however, you will come out better to have a separate phone line devoted solely for business use. All of the long distance calls you make that are business-related will be deductible as long as you keep good records.
If you are in the practice of buying lunch for your customers, then keep the receipts, along with records of the date, time, and amount of the meal plus the name of the restaurant and the customer. Up to half of these expenses can be used as deductions.
Expenses incurred as a result of upgrading your job training skills can be used as education deductions. Any money spent on enhancing your knowledge in order to better perform your job will qualify as this type of deduction.
If you use your vehicle for your business, you should be able to claim travel expenses on your taxes. This includes using it to run errands, meet with customers, or traveling anywhere as long as it is for business purposes. It will be to your advantage to keep a notebook filled with ledger sheets in your vehicle to log all of your travel, mileage, and money spent on gasoline. You also may be able to deduct a certain percentage of any auto repair bill or insurance fee associated with your vehicle.
There are many deductions you can use during tax season for your home-based business. You might want to meet with a professional tax accountant or auditor in order to learn more money-saving tips related to taxes and your home business.
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