Home Business Tax Deductions
Did you know that the average American works approximately “5 Months” just to pay their taxes? Plus, did you know that when you start your own home-based business, you could save an incredible amount in taxes over the course of a year?
As promised in this video, the current Business Mileage Rate for 2010 is $.50/mile.
Let us take a look at how the Rich save on paying taxes vs. the Poor and Middle Class.
- The Rich own companies/corporations and other businesses which are assets.
- The Rich spend their money through these entities first to buy more assets and then they’re taxed by the government on whatever money is left over. Then buy liabilities.
- The Poor and Middle Class mostly own liabilities and very little in assets.
- The Poor and Middle Class are taxed by the government FIRST and then spend whatever money is left over.
Do you see the major difference here?
By not having your own business, the income you receive is taxed at a much higher rate and more is taxed with little to no tax deductions. And many Americans have little or no savings or investments for retirement. But by starting your own home-based business, you are now starting to think and invest in your future like the Rich. Your own business will give you tax write-offs that you would never have by being just an employee.
As a home-based business owner, many of the things you are paying for now, become legitimate tax deductions. Here are just a few examples of legitimate write-offs by having your own business. The first thing you must do is establish a home office. Now that you have a home business with an established home office, what are some of the typical things that you can write off?
- Telephone – A separate business telephone and any expenses related to it- such as long distance- can be an income tax deduction. A home telephone is not a write off because it’s also used for personal use. Note: Deductions for cell phones are limited to the business use percentages.
- Office Equipment – Personal or a Notebook computer, printer, copier, calculator and etc can be deducted if they are used exclusively for your home business. If not exclusive use, then a deduction is allowed but again limited to the business use percentage.
- Office Furniture – A desk, chair, filing cabinets, lamps, and other furniture that you use in your home office.
- Office Supplies – Includes pens, paper, file folders, ink cartridges for your machines, erasers, bulletin boards, calendars, dictionary, glue, transparent tape and etc.
- Travel – Auto, airline tickets, hotel rooms and etc. If you travel during the course of operating your home business, you’ll need to keep a contemporaneous log of your expenses. The Internal Revenue Service (IRS) allows you to deduct so many cents per mile. On Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) are .55 cents per mile for any business miles driven. Airline tickets and hotel accommodations are fully deductible for a business-purpose trip.
- Entertainment – Dinners, lunches, sporting events and other legitimate functions can be used at 50% of the expense when business is discussed and documentation and records are kept.
- Mortgage/Rent – A percentage of mortgage/rent, utilities and other home services can be write-offs based on your overall square footage used exclusively to run your home business.
- Professional Fees - Don’t forget the payments to your lawyer and accountant for services directly related to the operation of your home business including tax return preparation.
The above are some of the major tax advantages of owning your own home based business.
Starting one of these businesses can cost you anywhere from less than $100 to over $1,000’s. There are all types of home-based businesses out there today, but you have to decide which one is right for you and your family.
A final word of CAUTION! Do your research and don’t get caught up in the “Hype” of becoming rich over night. Too many companies and individuals use this tactic to recruit you into their business. A legitimate business will require work and effort on your part. But the rewards and tax advantages will eventually outweigh not starting your own business PEROID.
Home Business Tax Deductions (100% Deductible Expenses)
Home Business Tax Deductions (50% Deductible Expenses)
Home Business Tax Deductions (Home Office Deductions)
**Since tax laws change every year, check the current laws so you know exactly what you can and cannot deduct on your income taxes. For more information you can visit www.IRS.gov/ to find out the current laws. Anyone who operates a home business should consult their accountant or tax adviser to get the most legitimate deductions available.
Thanks for this great post, Dave and Dawn! I for one have saved thousands of tax dollars over the last few years as the result of having home based business. It’s amazing how easily these savings can add up!
It’s great to have advice like this from a true professional, and I like the way Dawn makes it clear that you need to calculate the percentage of your business use vs. personal use for things such as cell phones, etc.
Looking forward to more videos on the subject of taxes!
.-= Kathy Jodrey´s last blog ..The Slight Edge by Jeff Olson – My #1 Recommendation for Creating the Competitive Edge that You Need to Succeed =-.
Thanks for this great post, Dave and Dawn! I for one have saved thousands of tax dollars over the last few years as the result of having home based business. It’s amazing how easily these savings can add up!
It’s great to have advice like this from a true professional, and I like the way Dawn makes it clear that you need to calculate the percentage of your business use vs. personal use for things such as cell phones, etc.
Looking forward to more videos on the subject of taxes!
.-= Kathy Jodrey´s last blog ..The Slight Edge by Jeff Olson – My #1 Recommendation for Creating the Competitive Edge that You Need to Succeed =-.
Hey Dave and Dawn, great advice. Or rather, important advice and costly if one doesn’t take action on it.
Taxes is one thing that I just don’t get right. Fortunately I have a accountant mother in law who is quite happy to keep me in line!
Great post, thank you!
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Hey Dave and Dawn, great advice. Or rather, important advice and costly if one doesn’t take action on it.
Taxes is one thing that I just don’t get right. Fortunately I have a accountant mother in law who is quite happy to keep me in line!
Great post, thank you!
.-= George Fourie´s last blog ..[Showcase] Great Member Blogs And How You Can Create The Same =-.
Hi Dave and Dawn,
This is such a great post, It’s important to know that even if your brand new to Network Marketing, you will come ahead in your first year in business, because of the tax breaks that you receive.
I would also like to recommend this book that I read: “Lower Your Taxes Big Time” by Sandy Botkin, former IRS Tax Attorney.
Sharlene
Hi Dave and Dawn,
This is such a great post, It’s important to know that even if your brand new to Network Marketing, you will come ahead in your first year in business, because of the tax breaks that you receive.
I would also like to recommend this book that I read: “Lower Your Taxes Big Time” by Sandy Botkin, former IRS Tax Attorney.
Sharlene
I have enough to itemize deductions, as opposed to taking the standard rate. The service is used for business and personal use.
Business use of the home deduction for a daycare may be determined by the following equation: Percentage of a week’s hours that home daycare is open for business, multiplied by the percentage of the house that is used for childcare, equals the percentage of the direct expenses that can be taken as a deduction.
Home business tax deductions are one of the greatest benefits of having your own home based business. Many home business entrepreneurs never really take full advantage of all the deductions available for them. Mostly this is because they may not understand or know about all the home business tax deductions available for them.
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I thought this article was a good heads up of things to consider when operating a day home. I found it informative and will keep in mind many of the things mentioned.
Thanks for the great content. I’m always searching the net for content that will
give me some new ideas for my own blogs and legitimate home businesses.
Great blog and thanks for the great article.
Brad
http://yourdesiredlifestyle.com
Thanks for the great content and information on a Legitimate home businesses.
I search the net looking for this type of content to give me ideas on future articles that I am going to write on this same general subject. Appreciate reading your article and information on this particular subject.
Thanks Dave, I do a lot of these but I’ve purposefully left out my home deduction so that when it comes time to sell, I don;t have any worries s about the tax implications
.-= Bill Cowan´s last blog ..Muscle Repair and Muscle Growth =-.
Hi Bill, Dawn here. Thanks for your comment, but I wanted to say that you may be missing out on more tax savings now by not taking the home office deductions compared to the tax implications upon sale. Some of the deductions that you are allowed now have no impact on the taxes you’ll incur when you sell your home. I hope you will consider it further and get some good tax guidance.
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@Sharlene Stevens
Sharlene, what were your biggest takeaways from Sandy Botkin’s book?
Thanks for addressing this issue. I hope you do more over time — especially how to keep all these records. Actually, the basics of this is not much different than when I was a pastor. But I had never thought of things like mowing the lawn. But maybe I was never told about that because I don’t have a separate room as a home office.
So I’m wondering about things like lawn mowing. There are times when I do have people over for business-related things — which are really ministry. Of course, my lines are rather blurred here, because my business IS a ministry. I’m only now beginning to think about these things because hopefully this year I’ll actually make money from what I’m doing. So it’s only now that I’m beginning to have questions.
Appreciate your post here.
The video is not very clear as i could not easily view the details that were shown but overall I managed to understand the procedure to buy the RAP. Now I only need to think out a strategy to use this product optimally.
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This article brought up a lot of good points about taxes. I had never thought about the difference in taxes between the rich and the lower income classes. That is interesting that big businesses get to purchase assets and then pay taxes. I thought the videos were great. Dawn does a good job.
Cheers,
Shanae
Thank you for this post Dave and Dawn.
It is powerful to know we can work from home saving money regarding taxes.
This is another confirmation that the richer become richer and the poor more pore if we do not have the knolwdge of how to organize ourselves as service professionals.
The good thing in Europe is that solopreneurs like sales agents can write off most of their expenses, but again our economy is very shaky and we never know what new laws require from us.