11/19/2023 0 Comments Wineshop at home business card![]() The home office is used exclusively and regularly for the administrative and managerial activities of your business.With exceptions, the home work place must be acceptable to receiving clients and customers on a regular basis.The workspace must be your principal place of business.Here are some guidelines taken from “Ask the Small Business Advisor” Stephen Windhaus at (See Attachment)Īn outline of some of the basic requirements to secure deductions on a home-based business: Now that same percentage of your mortgage, home maintenance fees including lawn care and housekeeping and utilities can be deducted. But it can be as small as a corner in your family room with your personal desk. The best option is a separate room used only for your business and can not contain a bed. Home Office-Determine the percentage of your home used for business.(This then becomes your commuter miles and the rest is deductible.) Repeat this on the way home. For example, on the days you go to work, make a stop close to home that could be considered business related. Then get smart about your comings and goings. Get in the habit of having your oil changed at the beginning of the New Year to get a verifiable record of your mileage for your records. Generally, commuter miles (those to and from work) do not count but on days you don’t go to a job, all mileage used for business is deductible. Check with your tax preparer for the most recent mileage guidelines as these change from year to year. Car Mileage-Keep a separate log in your car to track mileage.You can also take pictures of each item and place in your tax record. Be sure to list each item and list its fair market value. To transfer current personal items into business use, have your business pay your household account fair market value (not what you originally paid). Business start up expenses-Obviously your New Consultant Kit and Launch Sampler are start up expenses, but you can also take fair market deductions for any office equipment that you previously owned and have transferred into your business such as computer, fax machine, printer, furniture, pictures on the wall, phone, etc.(Be sure to clear all deductions through your tax preparer.) In keeping records, one of your goals is to take current taxable income and shift it to non-taxable income through legal deductions. Make payments on your business expenses including your business credit card from this second account. Never deposit business checks into personal accounts. Get a second personal checking account and a credit card to use solely for business.īe sure to deposit all profits into that account and if at first you need to fund your business with personal monies, make deposits and keep track of these as personal loans for your business. To qualify as a business, you must keep funds separate. Keep your business income separate from your household or personal income.Ĭommingling of Funds is a major IRS no-no. These are no longer the red flags they used to be as the IRS has become more supportive. Ask them how they feel about Home office deductions. Remember that CPA’s can fail all questions on taxes on their exam and still pass. Not all CPA’s understand Home Based Businesses. Having an enrolled agent prepare your taxes can be a real asset as they can legally represent you in tax court. But showing profit is key to establishing your business. Smart business owners can get their taxable income down to 10% or below. Home based business owners have equal access to most of the same deductions that big business has.Īn employee first Earns, then pays the government and then gets to spend what is left.Ī Business Owner Earns, then Spends (expenses) and then pays taxes. The IRS recognizes two types of taxpayers: the employee and the Business owner. Taxes and your Home Based Business DeductionsĪmericans over pay billions of dollars each year in taxes because they get bad advice or try to do their own taxes.
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