Keep More of What You Make – Start A Home-based Business – Tax Deduction
Keep More of What You Make - Start A Home-based Business
Direct Selling Womens Association
The best advantages of owning a home-based business are you can turn non-deductible expenses into tax deductions. The deductions you create for your Schedule C have a more significant impact on the total taxes you pay than do deductions on Schedule A. Schedule C deductions not only reduce federal income tax, they also reduce self-employment tax, Medicare tax, and state and local taxes.
Some favorite tax deductions for home-based businesses include the following:
Meals and Entertainment can be 50% deductible when you are with prospective or existing clients, vendors, etc. If you are in a service business or sell products, most everyone is a potential client. It is important to follow the simple documentation guidelines issued by the IRS and to understand there are limitations. An example of a deduction you cannot take is dining out with your spouse. Even if you are business partners, the IRS says no to this. If together, you take a potential client to lunch then the meeting expense is deductible.
Trips must be mostly business-related to be deductible. If a small element of fun is involved, you will most likely have a completely deductible trip. The deductions will not apply to a spouse who tags along, unless it is also a working trip for the spouse. Compliance with IRS regulations can be tricky, so it is best to check with your tax advisor before assuming your trip to Hawaii will be deductible.
Utilities and other expenses for the portion of your home or apartment you use exclusively for business are powerful deductions. Without a home-based business, the most one can deduct is interest and property taxes on Schedule A. In relation to a home-based business, a portion of utilities, maintenance, cleaning, lawn service, pest control, etc. can be deducted on a Schedule C.
Income Shifting. Let us say you have three kids who are ages 10, 12, and 14. You can pay them to work in your business. Children must be eight years old to be paid for working in a family-based business. Each child can earn up to $4,700 in 2002 without paying income tax. You also have the advantage of not paying Social Security or Medicare taxes on your dependent children who work in your business. In this example, you have shifted $14,100 tax-free dollars to your kids. This is clearly better than allowance! There are rules, however. The kids have to actually work and be paid fair not excessive wages for their services
These are just a few of the many tax advantages available to owners of home-based businesses. It is strongly recommended you enlist a qualified tax advisor to help you learn how to document your expenses and how to legally take every deduction to which you are entitled.
This article has been provided by Vicky Collins, The Financial Center Director for the Direct Selling Women
Home Based Business Tax Deductions – Tax Deduction
Home Based Business Tax Deductions
Tara Grant
Running a home based business reaps many wonderful tax deductions that other businesses some times may not claim. Unfortunately to many small business owners end up paying the government taxes every year because they are unaware or several small business deductions that are available.
Most of the time any expenses that are related to your business can be added as a deduction on your taxes. If you do not pay taxes through out the year, deductions can help you from paying a large amount of taxes each year and can also adjust earned income. Try to avoid paying large amounts of taxes or owning any money by keeping track of simple things!
Each business is a bit different so be sure to mention these ideas to your tax advisor or accountant to see if your business can qualify for these deductions.
1- If you join any business or purchase into any franchise, the expenses such as kits, or franchise fees may be claimed as a deductions.
2- Business Supplies. Be sure to save all receipts for any supplies you purchase for your business use. Computer paper, business cards, pens, catalogs, or any items you purchase and use for your business.
3- Advertising- Most advertising can be claimed on your taxes. Keep all receipts for any newspaper ad
Home Business Legalities And Tax Advantages – Tax Deduction
Home Business Legalities And Tax Advantages
Dean Phillips
Even if you work out of your home, most cities and/or counties require you to have a business license and/or permit. Check with your local government municipalities to find out what the requirements are for where you live. Depending on where you live, you should be able to get this information from your local courthouse or townhall.
Zoning may also be an issue. Municipal ordinances can be very restrictive about what types of businesses are allowed in a residential district. This also applies if you plan on placing a sign outside of your home. Again, check with your local government municipalities to find out what the requirements are for where you live.
In addition, depending on how your home business is structured--as a sole proprietorship, partnership or corporation--there may be forms to file with the state. The legal structure affects taxes and the liability of the owner and the home business, so its important to follow the appropriate procedures. Contact your states Department of Revenue for filing fees and information.
If you plan to operate your home business under a name other than your own, you will have to register a fictitious name with the county--usually referred to as a DBA filing Doing Business As. The exceptions to this regulation are corporations and partnerships doing business under the umbrella of the corporate or partnership name.
As a home business owner, you may be required to file estimated tax returns and pay estimated taxes quarterly. If you have employees, you also have to submit taxes withheld from employee paychecks. Here are some of the taxes you may be responsible for:
Employment taxes -- Federal income taxes, Social Security and Medicare, federal unemployment and state income taxes.
Federal self-employment tax--Required by those who work for themselves to cover Social Security and Medicare contributions.
Sales tax--Each state requires a sales tax number for any company involved in selling tangible items. Sales tax is collected, reported and paid to the state either monthly or quarterly.
Unemployment insurance tax -- You are required to pay federal and state unemployment taxes if you have more than one employee on the books for at least 20 weeks in a calendar year, or if they have paid more than $1,500 in gross wages in a calendar quarter.
Again, check with your states Department of Revenue for more information.
A home business qualifies for all of the same tax deductions regular businesses do. In the eyes of the IRS, the only difference between most home businesses and Fortune 500 Companies is their size, and the fact that home businesses can also deduct many household and living expenses.
Owning a home business will entitle you to deduct thousands of dollars in every day expenses. After all, why pay more in taxes than you have to
Listed below are just some of the items you are allowed to deduct:
Your car and car expenses.
Your mileage.
Your home computer, printer and other office equipment.
Your home. If youre not a homeowner, you are allowed to deduct the area where your home office is set-up.
If youre a homeowner, you may deduct a portion of your property taxes and utilities.
Your travel expenses.
Your restaurant meals, entertainent, dinner parties.
You may pay wages, tax free, to two of your children, if they are involved with the business.
You may deduct your families health insurance.
NOTE: To qualify for the above tax deductions, you must be actively working your home business.
In closing, since tax laws are continually changing, I highly recommend you consult with your accountant or tax advisor to learn more about applying the aforementioned deductions to your home business.
About The Author
Dean Phillips is an Internet marketing expert, writer, publisher and entrepreneur. Questions Comments Dean can be reached at mailto: dean@lets-make-money.net
Visit his website at: http://www.lets-make-money.net