If you work from home, there are many HOME BUSINESS TAX DEDUCTIONS available to you:
1. Home office
A home office is one of the most beneficial HOME BUSINESS TAX DEDUCTIONS. It must be a space used exclusively for your business. It does not have to be a full room. In other words, it can be part of a room. To determine how much of the space is deductible, measure your work area and divide by the square footage of your home. The resulting percentage is the fraction of your home business expenses that can be deducted, such as: rent, mortgage, utilities, insurance, etc.
Many small business owners are not aware that furniture is one of the HOME BUSINESS TAX DEDUCTIONS available. Office furniture can be deducted in either of two ways: You can deduct 100% of the cost in the year that you purchased it, or you can choose depreciation by deducting a portion of the expense over seven years.
To take the entire expense in one tax year, use the Section 179 deduction.
If you opt to depreciate the furniture, you must use an IRS chart to make separate calculations each year.
To decide which option is best for you, try to anticipate what years your business will most need these deductions.
3. Office supplies
Even if you are unable to take the home-office deduction, you can still deduct the business supplies you purchase. Be sure to keep all of your receipts for your HOME BUSINESS TAX DEDUCTIONS.
4. Other equipment
Equipment such as computers, printers, etc. can also be deducted100% in the year they were purchased, or they can be depreciated (over five years).
5. Software and subscriptions
Software used for your business can be depreciated over three years or can be fully expensed in the year purchased.
For any business and industry-related magazine subscriptions, take the total cost as a full deduction in the year spent.
6. Mileage and car expense
The miles that you drive for business are also great HOME BUSINESS TAX DEDUCTIONS . Be sure to keep detailed records. Keep a notebook in your vehicle to record the date, purpose of your trip, mileage, tolls, and parking.
Mileage can be deducted in either of two ways: You can total the mileage, multiply it by 56 cents (for 2014) and add in the tolls and parking to calculate your deduction.
Another option is to calculate your business usage versus your personal usage and deduct that portion of your auto-related expenses including gas, insurance, and repairs.
Include payments if you are leasing. If you are buying the vehicle, be sure to factor in any loan interest and depreciation on your car.
7. Travel, meals, entertainment and gifts are also great HOME BUSINESS TAX DEDUCTIONS.
When traveling for business, the entire hotel cost is tax deductible, as is the cost of the travel whether by air, auto, or train, rail or auto. Also, the costs associated with travel such as rental cars are deductible with the exception of dining out. You can only deduct 50% of your meals while traveling.
Unless you’re away on business, dining out is not deductible — unless you are meeting with a client to talk business.
Most other client entertainment expenses also are limited by the 50% deduction, although a direct gift to an employee or client is 100% deductible, up to $25 per person per year.
8. Retirement contributions can be HOME BUSINESS TAX DEDUCTIONS.
If you are self-employed and saving for your own retirement ( SEP IRA or Keogh), you can deduct your contribution on your personal income tax return.
9. Insurance premiums can qualify as HOME BUSINESS TAX DEDUCTIONS.
If you are self-employed and paying your own health insurance premiums, these too are 100% deductible (with certain limits: The deduction cannot exceed your business’ net profit, and the deduction cannot be taken if you were eligible for other health care coverage, such as an employed spouse’s medical plan.)
If your spouse was an employee, your spouse’s premiums are also100% deductible; if your children were on the policy as dependents, so are those costs.
BUT: Your spouse’s employment must be genuine, and you must offer equal coverage to any other employees.
Some of the premiums you pay for long-term care insurance for yourself, your spouse or dependents can also be deducted.
10. Social Security
If you are self-employed, you have to pay double the Social Security contributions that you would as an employee. The reason is because federal law requires the employer and employee each pay half. Self-employed workers are both. But be sure to deduct half of your S.S. contribution on our 1040.
If you have a 2nd phone line installed and use it solely for business, you can deduct all of the charges.
Many of us now rely solely on cellphones. If your cellphone is used for business, you can claim your costs as a tax deduction. If 30% of your time on the phone is spent on business, you could legitimately deduct 30% of your phone bill.
12. Child labor
Employ your kids! They may even be able to avoid paying income taxes, depending on how much you pay them. Also, there is no S.S. tax when you employ your child as long as the child is age17 or younger. And you can also deduct the salary as a business expense. (But only if your business is a sole proprietorship or a partnership in which you and your spouse are the only partners. If the business operates as a corporation, then the corporation is considered the employer and is still liable for the taxes.
Please consult with your Tax or Accounting Professional before claiming your HOME BUSINESS TAX DEDUCTIONS.