One of the biggest financial challenges for Americans today is managing their taxes. Left alone, employees can stand to give up nearly half of their monthly income to taxes. But did you know that having a home-based business can actually cut your taxes by a few thousand dollars every year?
The Rise Of Home-Based Businesses
Home-based businesses are a rising trend all over the world today. Not only do home-based business owners spend more time with their kids, enjoy time flexibility, and make money out of their talents and hobbies, but they also enjoy certain valuable tax privileges.
Done correctly, a home-based business can cut your total monthly taxes by $200 or more. Here are some ways to deduct from your total taxable income:
#1 – The Home Office Deduction. This provision lets homeowners deduct certain expenses of their home offices as part of the cost of running a business. Other expenses related to starting and running a home office also counts in this deduction.
There are certain requirements to be satisfied in order to qualify for this deduction, though. One is that the home office must be the main headquarters of the business. Two, the home office must be an exclusive room — you can’t, for instance, call it a home office if you run it on the dining table while the kids are away.
#2 – Building-related expenses. Take the total floor area of your home office, and then divide it by the total floor area of your home. The percentage you get is deductible from certain tax interests your home normally falls under.
For instance, if your home office is 150 square feet, and your home has a total of 1500 square feet, then you can deduct 10% from your mortgage interest. You can also deduct the same percentage from your property interest.
#3 – Other deductible expenses. There are many tiny expenses in and around your home-based business that you can deduct as direct and indirect costs of doing business. Examples of these expenses include utilities, moving/transportation, meals/entertainment, and more.
There’s so much to write about the tax benefits of a home-based business that it won’t fit in a single article. For more information on what the IRS declares deductible, visit www.irs.gov. You can also subscribe to my website to receive more free information about entrepreneurship.
Start Your Home Business Today!
Starting your own home-based business can mean a substantial improvement in quality of life for you and your family — and tax advantages are just a small part of it. If you’re not sure about starting a home-based business, I advise you keep your day job, but spend a few hours each day building the business on the side.
Kevin Donaldson is an advocate of home-based business. He believes small businesses will be the key to solving the country’s economic problems from the ground up. Visit his website for more free entrepreneurship advice delivered straight to your inbox. Why suffer from taxes? Click here now!