Save Money on Taxes

Your Home Based Business qualifies you to earn huge tax breaks approved by Congress and the IRS. Discover how to legally, morally, and ethically slash your taxes by 50% or more. You can save $3,000 to $9,000 in taxes every year – legally, morally, and ethically. Congress has approved a number of tax breaks as incentives for small businesses.  Owning a home-based business is the best way for the average guy to take advantage of these tax breaks. QUIZ: Did You Know…? Taxes are the largest expense for most people. It exceeds what they pay for food, clothing, lodging and transportation combined. Today, the average American spends 41% of their gross income on taxes. That means you are likely working 5 months of every year to support the government instead of your family! As a small business owner you have more tax breaks available to you than anyone else. Unfortunately, these tax breaks go unused because most small business owners don’t know about them – and the IRS isn’t telling. Any home-based business, even part-time, that is not a hobby, and is in pursuit of a profit, can qualify for huge tax breaks – it’s US Government law. Want a Fast Way to Make More Money..Right Now? The fastest way to get that raise you want is by just being able to keep more of what you make now. The only kind of income that counts is what you can keep. By owning a home-based business and taking advantage of the tax breaks available to you, you can keep more of your income, even if your business isn’t producing a profit! You just need to know the laws, and how to apply them. You will be amazed how easy it is to amass, literally, thousands of dollars of overlooked or unknown deductions each and every year by simply being in business either full-time or part-time. What’s most amazing about our tax law is that you merely need to pursue a profit to get all the wonderful tax deductions. Could You Use an Extra $3,000 to $9,000 a year??? Every American taxpayer who works a full-time job and does not have a side business is probably overpaying taxes to the tune of $3,000 to $9,000 every year. Even self-employed people who do have businesses are collectively overpaying their taxes as a result of lack of tax knowledge to the tune of about $160 billion annually. These Tax Breaks Are For You! Did you know you could deduct… Most of your fun such as movies, plays, and season tickets. Your golf, golf balls, golf clubs and lessons. Parties in your home. Any vacation anywhere in the world by combining the trip with business. The IRS doesn’t require receipts for under $75 per item. All dry cleaning and laundry and even the cost of clothing itself! The cost of your children’s weddings and education including law school and medical school- No kidding!! All your kids braces, all dental, all mileage to and from the doctor, all deductibles, all eye glasses and contact lenses. Two, or even the cost of three or more cars in your business. How to legally take a home-office deduction and yet actually reduce your chances of an audit. (See below) A bunch of deductions people are missing at home even if they never claim a home-office deduction. Future postings will discuss dedcutions these and more Today Tax Topic is:  The Home Office Deduction The Home Office Deduction Some strategies to qualify and audit proof your home office deduction ·        Take photos of the office ·        Prove the space is used exclusively and regularly for business for a home office ·        Display home office number and address when appropriate ·        Meet and Greet clients and customers in your home office. Have business guests register in a log book ·        Keep a record of your home office time in your dairy book ·        Keep receipts and paid invoices The Home Office Deduction
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. The home office deduction is available for homeowners and renters, and applies to all types of homes, from apartments to mobile homes.There are two basic requirements for your home to qualify as a deduction: Regular and Exclusive Use. You must regularly use part of your home exclusively for conducting business. For example, if you use an extra bedroom to run your online business, you can take a home office deduction for the extra bedroom. 2. Principal Place of Your Business. You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers. Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities. Note: Additional tests apply if used for employee use. For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find: The requirements for qualifying to deduct expenses for the business use of your home (including special rules for storing inventory or product samples). Types of expenses you can deduct. How to figure the deduction (including depreciation of your home). Special rules for daycare providers. Selling a home that was used partly for business. Deducting expenses for furniture and equipment used in your business. Records you should keep. Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home (PDF), required if you are self-employed and claiming this deduction).
Home Office Deduction-  What is deductible and what is not deductible?
Generally, you may not deduct expenses related to the rent, purchase, maintenance and repair of a personal residence.However, if you use a portion of your home for business, you may be able to take a home office deduction – if you meet certain requirements. Deductible expenses might include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting and repairs. Those who work out of their homes are entitled to deduct ordinary and necessary expenses related to the business. This includes costs related to regular and exclusive business use that can be clearly distinguished from personal use – or reasonably allocated between the two. What is “regular” and “exclusive” use – what’s the distinction? “Exclusive use” means a specific area of your home is used only for trade or business. “Regular use” means it’s used regularly — not just occasionally or incidentally.  And that’s important, because both conditions must apply. For example, an attorney uses the den in his home to write legal briefs or prepare clients’ tax returns. The family also uses the den for recreation. The den is not used exclusively in the attorney’s profession; she can’t claim a business deduction for its use. Also, if you work as someone’s employee, you can claim this deduction only if the regular and exclusive business use of the home is for your employer’s convenience – not yours – and your employer does not rent the business portion of your home. What some factors to consider when claiming a business deduction for using part of your home? You use part of your home exclusively and regularly as your principal place of business; You meet or deal with patients, clients or customers there; You have a separate, free-standing structure not attached to the home – such as a studio, garage, or barn – that you use exclusively and regularly for your trade or business; You have a separate, identifiable part of your home that you use regularly for storage, such as inventory or product samples, as rental property, or as a home daycare facility. Personal expenses are not deductible: personal, family and living expenses are not deductible under any circumstances. A common error is to deduct expenses for a portion of the home that is not used regularly and exclusively for business. For example, the telephone service charge, including taxes, for the first phone line into a home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, and the cost of a second line used exclusively for business, are deductible business expenses. It’s really important to understand the rules, compute deductions correctly, and keep accurate records to substantiate those deductions.

I always recommend seeking the advice of a qualified tax professional.  A great resource for more tips and information is Sandy Botkin, CPA, Esq. his books tapes and classes are the best money I ever spent.

www.taxreductioninstitute.com

See also

http://www.irs.gov/businesses/small/article/0,,id=205053,00.html