How to take advantage of tax breaks with a home based business

How to Take Advantage of Tax Breaks With a Home Based Business

Tax Day of April 15 comes around before we are ready. Then we scurry to make sure we have all the deductions accounted for that can hopefully assist us in getting money back from Uncle Sam.

Unfortunately, many people do not realize what kind of tax breaks they can get by having a home based business. Most people think there are many more requirements to having a home business than is actually required by the government. There are only three:

1. You show a profit ‘intent’ (even though you may not show a profit yet).
2. You work your business on a regular and consistent basis (even if only three to four hours per week).
3. You keep good records (just like a big, full-time business).

With a home-based business, it’s important to remember that your street address is also your business address since it is housed in the same location. Because of this, there is a «deductible business portion» of your home-related expenditures. This can include a portion of utilities, furniture, janitorial service, home office equipment, maintenance expenses, etc.

There is also a huge benefit to hiring your spouse for your business because you can then deduct ALL out-of-pocket health cost for the whole family. If you hire your kids in your business rather than give them an allowance, the wage expense is tax deductible to you and is usually tax free to your child (up to $5,700 per year and put any above that in a Roth IRA for maximum benefits).

The biggest single tax deduction may be in your car’s ignition in relation to potential tax savings. Keeping a 90-day consecutive period vehicle log is actually allowed to figure the tax break for your car, rather than writing down that information every time you go somewhere related to business all 365 days of the year.

Never take another ‘vacation’ and not get to claim tax breaks. Make sure you do something in relation to your business when you are traveling so it will become a tax deductible business trip. However, there are some stipulations that apply in this field and you need to be able to substantiate the business expense. However, the number 1 reason that triggers an audit is math errors on the return. The second reason is an incorrect Social Security number on the form. So to keep from sending up a red flag, triple check your numbers.

The IRS has been instructed by Congress to give huge refunds and deductions to taxpayers who have a home-based business, OR anyone who operated one at any time in the past three years. You can easily file an Amended Tax Return (Form 1040X) by following simple step-by-step instructions if you had a home-business in any of the past 3 years, and get a refund check for thousands of dollars…plus interest if you have not claimed those deductions yet!

You deserve to get as many tax deductions as possible if you have a home business, including an online business. Be sure to do your research to see what you may be missing out on.