Running a Home Business? Get the Most from Tax Benefits
Many people start a home based business to enjoy more freedom and to have the luxury to work from home. But apart from these advantages, running a home business also means enjoying tax privileges that are only available for home based business owners.
Surprisingly, not many are aware of these privileges. Did you know that if you are a freelancer or an independent contractor, then you are considered as a Sole Proprietor? All you have to do is register the company under your name and obtain a business license to enjoy your well-deserved tax deductions.
Register Your Home Business
The rules for home business tax deductions may vary from State to State. To be sure, you can get in touch with your local office and inquire what specific costs you can apply for tax deductions. However, make sure that you’ve already registered your business as a Sole Proprietorship and obtained a license from your local State. Generally, possible tax deductions for a home based business include the following:
Home Office. The expenses you paid in repairing and maintaining your home office are tax deductible. You can also calculate the area of your home office and apply that portion of your home for mortgage interest, property taxes and home insurance tax deductions.
Telephone bills. Yes, business calls can also qualify for tax deductions.
Internet Connection. If you use the internet for your home business, don’t forget to include them for tax deductions.
Travel costs. If you must travel to meet a client or to purchase stocks, keep a record of all your costs (transportation, hotel accommodation, car rentals, etc) as these are 100% tax deductible. However, meals are only 50% tax deductible.
Advertising. The costs you’ve incurred for marketing the business can also qualify for tax deductions.
Equipment and Furniture Purchase. Computer, fax machine, printer, office desks, chairs, and filing cabinets – all these can qualify for tax deductions if you use them in your home office.
Office supplies. Yes, even office supplies like paper, ink cartridges, pens, and other tools you use for your home business can be tax deductible.
Promotional Items and Gifts. Customers love freebies and you’ll be glad to know that you can claim up to $25 tax-deductions for each promotional item you bought.
Spouse and Children. You can also employ your spouse and children to enjoy 100% tax deductions from their salaries and health care benefits.
Health Insurance, Social Security, Retirement Fund. As the owner of the home business, you can claim tax deductions from your Health Insurance, Social Security and Retirement Fund contributions.
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