Saturday, December 18, 2010

Home Business Tax Deductions



Home Business Tax Deductions



Here is the framework for possible deductions related to you home-based business. Note: never buy into a home-based business because you can get deductions. Not smart. Also, if you have a significant income I suggest investing in CPA services. My CPA charges $400 a year. I consider this a bargain because she is very experienced and has saved me much more money than that.




Tax season is right around the corner. If you own your own home-based business or are looking to start one, it’s time to take a look at what you can write off. 



Your Home Office


If you have a home office, you can deduct a portion of your mortgage equal to the size of the space you use. In order to qualify for this tax deduction the space must be:


* Your primary place of business
* Where you meet with customers
* Used solely for your business



Transportation and Meals


You can deduct the cost of transportation, meals and even lodging if they are part of your business. For example, if you’re attending a seminar or meeting with a client off site you can deduct: 


* Gas 
* Parking fees
* Depreciation and repairs
* Tolls
* Train, bus or airfare
* Hotel bills
* Food
* Taxi fares
* Phone calls




Insurance Expenses


You can and should deduct your insurance premiums. Here’s what you can consider a business expense: 


* Medical
* Motor vehicle (if your car is related to your business)
* Theft
* Any additional insurance you may need for your business. For example, property insurance if you rent an outside space to store your inventory.




Deductions for Retirement Plans


You can also deduct contribution to retirement plans. These include:


* Simplified Employee Pension (SEP) plan 
* Savings Incentive Match Plan for Employees (SIMPLE) 
* Qualified plans (i.e., Keogh and self-employed 401(k) plans)




Other Deductions You May Qualify For


Interest Expense – If you applied for a loan to start your business, you can likely deduct the interest you’re paying on the loan. 


Bad Debt Expense – If you have a customer who has defaulted on money owed to you, you may be able to deduct it from your income taxes. 


Legal and Professional Fees – Payments to accountants, attorneys, and contractors used to help run your business are also considered expenses.




Before You Do Your Own Taxes


Before you file any taxes, consult an accountant to find out if you qualify for these expenses and deductions. You may also qualify for more than what’s listed here. An accountant’s expertise is invaluable. Make sure you’re compliant and get help from a qualified tax accountant. They can help you get the best tax return ever. 


Greg Cryns
Work At Home Profiles
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