Did you know that you could get back thousands of dollars from the IRS, just for having a home based business? Either that or you can save thousands of dollars on your income taxes. Take for instance, my friend Trisha. Her and her husband started a home based business. For the year of 2007, they were able to write off $60,000 on their income taxes. Now, I dont know about you but that sure would motivate me to start a home based business.
Lets talk about some of the tax breaks that you can receive when starting a home based business. Most of own a computer, a printer, a cell phone and an internet connection. Guess what? You can write all of this off.
Here is how it works. Say that you are using your computer, printer, cell phone and internet connection 75% of the time for your business and 25% of the time for your personal use. Then you can write off up to 75% of the cost of these items on your taxes. For example, if it cost you $3000 a year to have and use these items, you would take 75% of $3000 which would equal $2250. So you could use this $2250 as a deduction on your taxes.
Now here are some other things you can deduct:
Electricity & Gas
Part of your Mortgage or rent
Lawn care (if you have a daycare)
Digital camera, video camera, fax machine
Automobile & Automobile expenses (including carwashes, oil changes, etc)
Gasoline or mileage
Pedicures, manicures, facials in cosmetic or skincare businesses
Clothing (dependent on the business)
Painting & home improvement type expenses (if rental properties)
Toys, equipment
Food & Travel
Office Supplies
Plumbing & Fixtures
You can depreciate large purchases like computers, appliances, etc.
A good tax professional will know exactly what you can or cant write off on your taxes. A rule of thumb is to find a professional tax accountant who has years of experience and who keeps up with current tax laws. It is very important to keep good records.
You will want to open up a separate checking and savings account for your business. You should have a debit or credit card separate from your personal account that you use for your business. Never comingle funds. Keep all receipts and make sure you write down the nature of the expense on each receipt. For example, if you are having dinner with a potential client. Write down the name of the client and the name of the business on the receipt. You should have a separate file for each category that is pertinent to your business.