So far - this is my favorite article on having a home based business by Jeffrey, the Administrator of
savingsadvice.com. Jeff really gives you an idea of ow this can lower your tax liability by reducing your income through the deductions allowed to home businesses.
Do you like being your own boss? Do you like not punching a time clock, or getting written up for time card correction errors? What about your work hours; tired of working graveyard? Is there a day during the week you wish you had off so you can take your kids to the doctor without being docked in pay?
Once you have a home based business, you will need office supplies, paper, ink, computer, printer, perhaps your own supply of shipping envelopes, stamps, catalogs, sales tools, software, an office chair and desk, filing cabinets, mileage @.57/mile to go to your Avon Meetings, to go to customer's home or business location to deliver merchandise or catalogs....all of these expenses will make up for the taxes you gave to the IRS by being a cashier at your local fast food restaurant. I use Turbo Tax for Home Based Business. It separates these out for me legally and ethically.
Before we get started, let's talk a little bit about tax deductions. Most people know the basic tax deductions the average American is entitled to deduct. These include interest on a home mortgage, property taxes, contributions to qualified retirement accounts and charitable contributions. There are some others depending on your circumstances, but those are the basic deductions of which all of you are most likely aware. What you probably have not considered (unless you are already doing so) is that the tax deductions allowable to business owners are much greater in breath. Business owners can deduct almost any cost, with some exceptions, related to their business. The key to getting the above savings we mentioned is to simply start your own home business.
Qualifying for the deductions allowed to home businesses is not difficult at all. There are some basic requirements that you need to meet which are all pretty straight forward (refer to IRS Publication 587 - Business Use of Your Home), but should pose little problem for most people. The main requirement is that the area you use in your home for your business should be used exclusively for your home business. That means it has to be a defined area like a room and that the area should not have kids coming in to play games on the computer or your spouse using the area to do non business related activities. It's a business, and only business, area.
Once you have the office space determined, all the expenses directly related to that space and your business are 100% deductible. If you paint the room, buy office furniture and equipment or put down a new floor, you can deduct 100% of the cost. Anything that is specific to the business area and your business will most likely qualify for this full deduction.
You will also want to determine the percent of your home that is being designated for office use. This is important for calculating a number of indirect expenses that you will also be able to deduct. In the beginning of this article, we said you could deduct 10% of a lot of household expenses. The actual percentage you can deduct is determined by the percentage of space your home business is using. For example, if you have a home that totals 1,750 square feet, and the office space you'll use for your home business is 175 square feet, then your home business office is 10 percent of the total house space. The amount you are able to deduct on the indirect expenses is directly related to this percentage, and in this case, you would be able to deduct 10% of all of your indirect business expenses
This website below has more ideas but reiterates the idea of a home based business deduction for you!
Take advantage of home office deductions. If you use part of your home for business, you may be eligible for the new home office deduction. The simplified option allows you to take a deduction up to $1,500 based on $5 per square foot for up to 300 square feet of the area of your home used for work.
Finally, don't listen to other people who say, "You'll never make any money", they don't have the opportunities you do because their minds are closed to innovative thinking, thinking outside the box, observing techniques that you can incorporate in your business for success. First, try; then do; then do it again until it works!