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10 Tax Tips for Owners of a Home-based Business

10 Tax Tips for Owners of a Home-based Business

By on May 14, 2014 in Filing Taxes | 0 comments

10 Tax Tips for Owners of a Home-based BusinessThere are countless benefits to owning your own home-based business….flexibility, no long commute, and being able to work in your pajamas! An estimated 20 million Americans now call their home their “office”. In addition to flexibility and these other great perks, you also get some tax benefits from owning a home-based business.

As you begin your tax preparation and plan for the coming tax year, keep these tips in mind:

1. You may be able to deduct housing costs: If your home office is your principal place of business (and you have no other off-site fixed business location) or you use your home as a frequent meeting place for your clients/customers, you can likely deduct a portion of the expenses of your home. Your home office deduction needs to be proportionate to the size of the part of the house you use for your office (base this on square footage used). Keep in mind, this space will have to be exclusively used for business purposes.

2. If you deduct a portion of your housing costs, you can also likely deduct the same portion of your utility bills (heating and electricity). You may also be able to deduct a portion of your internet bill.

3. Office supplies: It costs money to furnish any office. Paper, printer cartridges, postage, pens that are used for your business can be deducted.

4. You can also deduct the transportation-related costs if you are doing official business including driving to meetings with clients/customers/vendors, or even driving to the bank to make a deposit or an office supply store for office supplies. As you might expect, it is always best to keep records of all the driving you do related to your business.

5. Computer purchase: If you purchase a computer for your home office, deduct the cost! If you are using the machine exclusively as a part of your business, you should have no trouble with this deduction. If you have only one machine for business and personal use, then you should only deduct the percentage used for your business.

6. Consider your retirement: A great way to lower the taxes you owe the IRS is to deduct retirement contributions. This often gets overlooked with those who are self employed, but may be something to think about as you plan for taxes – and your future.

7. Health Insurance: If you own your own business, you should be able to deduct the cost of health insurance for you and your family. Again, like retirement, it is easy to put off getting health insurance if you are self-employed but consider the tax benefits!

8. Travel and Business Meals: If travel is part of your home office job, then you can likely deduct some of these expenses as well. Generally, you can deduct transportation costs (airfare, taxis, rental car, etc.), lodging, tips and 50% of your business related meals.

9. Consider paying estimated taxes: If you are worried that you may get hit in April with a large and unexpected tax bill, consider filing estimated tax payments based on IRS deadlines.

10. Finally, if you have questions or concerns, it is always best to confer with a tax professional for assistance. Working out of your home has many benefits but all of the rules related to deductions can be a bit overwhelming. Tax firms can take the stress away from this process and give you confidence that you are deducting what you should!

If you are trying to figure out what you can and cannot deduct for your home-based business, contact Success Tax Relief today. We are a leading provider of tax services to businesses of all sizes in and around the Houston area.

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