Work from Home? Tax Tips for Home-Based Businesses
It’s that time of year again. Many people who run a home-based business pay quarterly income taxes. This way, it isn’t a huge burden come April 15th. Whether you choose to pay income taxes throughout the year, or you wait until the last minute (like me), here are a few home-based business tax tips to lower your obligation, and hopefully contribute to a refund.
Snapshot of Legitimate Deductions for Home-based Businesses:
- Home Office - This is the room or space inside your home used exclusively for work. Thus, you can’t write-off your den or bedroom simply because it holds a computer and file cabinet.
- Vehicle Mileage - Does your home-based business involve driving? Whether you need to pick up business supplies or meet a client, you can write-off a portion of your yearly mileage. However, you’ll need to maintain accurate records. Keep a mileage log inside your vehicle and chart your business mileage.
- Miscellaneous Expenses - Most work at home professionals need the Internet. If you work exclusively on the net, or you communicate with clients via e-mail, you may be able to deduct a portion of your monthly Internet and telephone expense. Furthermore, if you have a business cellular phone, this expense is also tax deductible.
- Medical Expenses - Telecommuters and home-based business owners often pay their own health insurance. Fortunately, the self-employed can write off 100% of their health insurance premiums. This deduction only applies when the health insurance cost is less than your businesses’ net profit.
- Childcare - Freelancers know how difficult it is to work at home with children. In order to complete assignments, you might have to hire a babysitter or childcare provide. Be careful with this deduction. Since stay at home parents don’t qualify for a childcare tax credit, you’ll have to provide proof of employment.
- Office Equipment - Did you purchase a new computer, desk, file cabinet, software program, or other office supply? If so, don’t forget to keep the receipt. All business-related purchases are tax deductible.
- Business Trip/Lunch - These write-offs are a little tricky, and if you try to get one over on the IRS, you might dig a hole for yourself. Legitimate business trip write-offs include expenses incurred from a meeting, seminar, workshop, and the like. This doesn’t include your family vacation to Disney World, wherein you may have devoted 20 minutes to networking and finding new business contacts. The same hold true for meal write-offs.
This post is intended for general informational purposes only and is not a substitute for professional financial advice.
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Great post - I’ve been curious about what could be written off on taxes.