For any individual your largest expense are your taxes. One of the best ways to pay less tax is to have a home business. When you are only being paid by wages and salaries you virtually have no tax deductions. If you have a legitimate business you can take advantage of a wealth of tax deductions which can reduce your taxes by $5,000 to $15,000 or more per year.
Here are 7 strategies that you can take advantage of if you have a home business.
(I am not a tax accountant. Before using any of these strategies please seek the advice of a tax accountant.)
- HOME OFFICE DEDUCTIONS – For a while there was talk that taking home office deductions raised a red flag. As long as your business is legitimate and you designate an area for your home office you are okay. With that you can deduct expenses that you incur in the course of doing business. You can deduct office furniture like file cabinets, desks, office decorating and even office cleaning. You can also deduct rent, utilities, insurance, property taxes, supplies, phones, and repairs made to the office area of your home.
- EDUCATION – You and your employees of your home based business can deduct 100% of the cost of any education they receive up to $5,200.
- AUTOMOBILE – You can deduct your mileage when traveling for your home based business. Keep a log of your mileage and what you vehicle was being used for.
- TRAVEL AND VACATIONS – You can deduct the majority of any trip if you can link it to your business. The catch is you have to be doing business on the first and last day of your trip. Keep all receipts and document what you are doing for business.
- ENTERTAINMENT AND MEALS – You can deduct any 50% of meals that are being used for your business. Whether it is entertaining a prospect or making a sales presentation. If you have a business party at your home, you can deduct the entire cost of the party. Make sure the party is for a business purpose and document it well.
- MEDICAL REIMBURSEMENT PLAN – You can deduct 100% of medical expenses, even some of those that are normally not covered by some traditional medical plans. These include chiropractic care, vitamins, supplements, deductibles and co-payments.
- BUSINESS GIFTS – You can deduct business gifts up to $25 per person each year. If you are giving a gift to a business and do not designate who the gift is for, there is no limit.
You need to properly document your business expenses from your personal expenses. If you are using credit cards you either get a card in your business name or designate one card for business purposes only.