Have you ever heard that there are many tax deductions that a home based business owner enjoys? It?s a major selling point that those who offer these types of opportunities mention. However, when it comes down to identifying exactly WHAT these tax deductions are, there?s typically not a lot of information about them.
The IRS may share with you certain guidelines in its documentation. However, what they don?t share with you is the ?practical application? that you can use to actually apply and take advantage of these tax deductions.
Here are 5 tax deductions that home based business owners enjoy.
1 ? Automobile Expenses: If you use your car for business purposes you can write off the mileage that you use for any business purposes. For instance, if you are meeting with a potential client at a coffee shop, the miles you drive from your home to the coffee shop and back are deductible.
There?s also a loophole that you can use to convert personal driving time into business driving time. All you have to do is combine personal and business activity and now you can write off many of your personal driving trips as well.
2 ? Mortgage Interest or Rent: If you conduct business out of your home, you can write off a percentage of your mortgage interest or rent. This typically involves calculating what percentage of your home or apartment you have dedicated for business and writing off that percentage of your mortgage interest or rent.
3 ? Utilities: Another tax deduction that you can take advantage of is writing off a percentage of your utility bills. Gas, electric, water and sewer bills can all be deducted as legitimate business expenses. Like the mortgage interest or rent deduction, you will need to calculate what percentage of your home or apartment you have dedicated for business and writing off that percentage.
4 ? Travel Expenses: While you cannot deduct vacations, you can deduct travel expenses associated with your business. This includes plane fare, hotels, meals, rental cars and other expenses associated with traveling. The key is to make sure that more than half of the days on your trip qualify as business days.
For instance, suppose your home business has seminars and conventions that you can attend. You would also like to bring your family and double as a vacation. If you have more days at the seminar and convention than family days, you can write the entire trip off as a business trip.
5 ? Phone Bills, Cell Phone Bills, Phone Equipment, Accessories: You can deduct a percentage of your phone bill and cell phone bill if you use it for business. If you have a dedicated line for business, 100% of the expenses are deductable. If you share your personal line, you need to calculate the percentage of calls that are business vs. personal phone calls.
What?s significant about these expenses are many of these expenses you would incur whether you have a home based business or not. Therefore, if you currently aren?t involved in a home based business, you are in essence paying more in taxes than someone who is involved in a home based business.
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