How To Save On Your Taxes
The tax system was designed with two groups of people in mind. The people who go out to work, pay taxes and get paid what’s left and the people who own their own business, they still go to work but then they buy or pay for whatever they need for the business and only pay taxes and what is left. Do you see the difference? In my opinion EVERYONE should own a business, You can have it out of your home, (I can give you one for free) but once you have one, you will be blown away on the amount of money you will save on your taxes each and every year!
1. The Home Office Deduction
The Home Office Deduction allows you to deduct some or all of the expenses of your office at home and related expenses. To qualify for this deduction, your home office must be the principal place where your business is done
2. Building-Related Expenses
Repairs and improvements to your home office are completely deductible. For example, painting your home office is an expense that relates directly to doing business out of your home, so it is deductible in full. You can also claim for cleaning and maintenance costs
3. Security
You may deduct the business cost of security devices and monitoring fees as a percentage of the protected area used for business use of the entire protected area (normally the entire home). This is considered an indirect cost of doing business.
4. Insurance
If you own your home and pay home owner’s insurance, you may deduct a percentage of that expense, as with mortgage or rent expenses.
5. Utilities
You can write off utilities such as electrical, gas, and other utilities as business expenses.
6. Transportation
If you work primarily out of your home, you can usually write off the expense of getting to and from your appointments
7. Office supplies
You can usually write off many of your office supplies if you use office supplies in your business (computer, printer, paper and ink etc)
8. Phones and Communications
Additional phone lines besides your home phone that you use for business use, including cell phones used for your business, are tax deductible. Internet service, broadband, high speed cable connections are also deductible
9. Meals and Entertainment
If you take a client or prospective client out to lunch and talk about your business, it is often tax deductible as a cost of doing business. If you are doing business out of town or at your convenience on a business-related task, you can typically deduct the amount of meals.
10. Because You Can
All the tax deductions I have listed above can be found in the IRS tax code. They are all legal and allowable. So why wouldn’t you start your own home based business. You can start part time keeping your job as well. You might even discover that you love it AND that you are making more money than your job is paying. Your part time home based business could be the answer to all your prayers. At the very least it WILL be a way to save on your taxes
If you would like to learn how you can start a business out of your home at no cost to you, click here
NB Broker business has a small cost involved. Rep business has no cost involved. Both business’s can generate a substantial income. Choose which one is right for you.
Hi Julie – What are the standards these days for entertainment and dining deductions?
Good info! Thank you!
Debbie Goldberg
http://www.FreshBrothers.Wordpress.com
Sometimes it depends on your business. As a business owner, if i do business while out to dinner, i can write of some of the expense of that meal. Also as a referring travel agent, I am able to write off my own travel on my taxes as long as i have paperwork to show that i was conducting business while on vacation like doing a tour of the hotel and then filling out the appropriate paperwork
I have a small private business. I think it’s important for people to realize how careful they need to be about home office deductions–making sure the space is dedicated, that you have good records, etc. I’ve never had problems but have had office space apart from the home so haven’t tried that deduction.
Thanks for good tips. Sounds like you enjoy the home office world.
Judy Stone-Goldman
The Reflective Writer
Julie, I heartily agree with you! I think a lot of people (myself included) have been put off by the fear of audits, etc. that can happen if you don’t do it “perfectly.” I’m slowly getting over that as the years go by, but still a work in progress.
Your pov that “EVERYONE should own a business”… is an empowered stance. While I see your point – and you build a great platform for that with the tax advantages alone, I’m not sure that “everyone” should.
I think my first entrepreneurial endeavor was at the age of 8. Clearly, I didn’t care about tax advantages then, but it did set in motion a life-long path of being an entrepreneur. It continues to surprise me that so many people don’t have any idea what’s possible from having their own business. When a business is fueled and informed by the owner’s passion, purpose and desire (for more than “just” money), you add those tax bennies on top, and now, I wonder, “who wouldn’t want that?”
In this time of great change, I do believe that it is the small business owners and entrepreneurs who have the power to transform how business is done and create a sustainable, just and fulfilling world to live in!
Tambra
I used to work out my home for a few years as a marketing consultant until I came to work with my husband, and I loved doing that! Our tax preparer took care of all the tax deductions, and I know that was very helpful. Sometimes I wish I could go back to working out of my home again, there are so many great aspects of doing that! Maybe some day, when we retire from our business, I will relook at that possibility! Love your encouragement!
Great points Julie. I know I have saved money over the years because I have my own business so I am able to get the appropriate and allowable tax deductions.
Thanks for this information that we can implement and use to keep money that we may be losing to the Ignorance Tax (when we don’t have proper financial literacy and when we are operating from myths and misinformation that is perpetuated “out there”).
Rachel Lavern
http://www.rachellavern.com
Personal Transformation, Enlightenment and Development
Tax strategy is something near and dear to my heart. So much so that I started a company over 6 years ago that helps real estate investors increase their tax strategy. I think most people leave more money on the table when dealing with their taxes for fear of engaging the wrath of the IRS.
You’ve included great tips here although I would advise anyone thinking of taking advantage of these tips and the hundreds of other ways to save on taxes to find a CPA that shares your desire to utilize tax strategy and let them deal with the hundreds of annual changes in the tax code. I have found that my CPA pays for himself year in and year out with the amount he saves me in taxes.
Certainly the bottom line is that starting your own business can afford you more tax savings.
Darcie Newton
Wine not whine. Nature not nurture. Discipline for profit, none for cheese.
http://mywealthspa.com
Hi Julie,
Thanks for this timely advice. You make some great points, and I hope each of your readers will be properly bold, as well as cautious, about claiming them!
These 10 tips are surely just the tip of the iceberg of tax benefits available to the qualified owner of a home-based business. It’s good to encourage everyone to think about creating a home-based business, but I’d hesitate about recommending that everyone “jump in”. Compared to punching a time clock in someone else’s company, being your own boss involves keeping an enormous number of loose ends “tied up”. If you’re running a successful home-based business, CONGRATULATE YOURSELF! It may me fun, but it ain’t easy.
One more thought: My wife is an Enrolled Agent, and we often talk about taxes. I’ll ask her to glance at your list of the Top Ten, and tell me what she thinks. Just casually, so please don’t freak out. But I know what she’ll say: That each tip is a possible deduction, but far from a sure thing, and usually for only a fraction of your total expense in that category. For every single one of your ten, the IRS specifies a significant number of conditions that MUST be met for the deduction to be allowed.
I’m not qualified, so I won’t offer anyone tax advice, except to urge everyone to do their homework, proceed with caution, and claim every deduction they’re legally entitled to. If their return is the least bit complicated, they might be wise to consult a tax professional. Good luck!
Robbie
Robbie you are quite right. And looking back i probably should have put in a little note at the end to say “always consult with your tax professional” This was meant more as an incentive for people to perhaps consider starting a home based business rather that “tax advice” which i would never presume to give.
I totally agree Julie – it’s a bonus to be able to take tax deductions on top of doing something you love – I know, I do it! I also agree with Darcie’s comment that a good CPA can help you find the deductions as well as make sure you are not claiming anything you shouldn’t.
Pat Zahn, Photo Solutions Superhero
http://www.PatZahn.com
Great tips! This is all new for me with my recent home business option….
What is funny…is hubs has a home office, too….so, maybe we can deduct x2 haha
I am thinking soon – one of us has to rent space. Having a home office is great, but 2 is a little crowded! Rachel
Good info especially at this time of the year. I tell my clients that tax deductions aren’t an end of the year strategy, it’s a year long effort that pays off.
These are all good things to know Julie. Why pay more taxes than we need to? Although I live over in the UK the same principles apply to me working from home. Thanks.
Fiona Stolze
http://fionastolze.wordpress.com
Great tips!
Thanks Julie from one who is getting used to the system here. I do rely on the CPA to tell me what I can deduct however as I would rather do that than risk an audit.
Louise Edington
Facing Fears For Freedom
http://louiseedington.com
Good info, Julie. Just have to remember to save all those receipts! Definitely lots of advantages of being a home-based entrepreneur that many people do not realize! Thanks,
witty, wickless, WAHM, tutor broker. Direct Sales Diva, consultant, multi-tasker.
http://www.LaurieHurleyOnline.com
Concise and excellent!
Thank You!
Julie,
First of all, I love your profile pic and the title of your blog! Fierce Over Fifty says it all!
Great information and I love the list format!
I did comment but not there
Anyway, I just go with my CPA on all this. He said that the Home Office etc are so complex that as a 1099 contractor earning very little they are not worth doing – maybe that will change now I’m doing the coaching. It’s good to get some tips but I urge people to check their own situations with their CPA first.
Louise Edington
Facing Fears For Freedom
http://louiseedington.com