The Benefits Of Having A Home-based Business
In today’s post I’m going to be sharing 9 tax benefits of having a home-based business, there are definitely more than 9 tax benefits, however my goal is not to overwhelm you but provide you with the information in why starting a home-based business can become beneficial for you.
Many home-based businesses have started during the pandemic and with many people working from home, and now is a great time to start your business.
There are many tax advantages for you and I am going to cover some of them in this blog post, so bookmark the page or take notes, because you’re going to want to have this information handy.
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. (excerpt taken for IRS.gov website).
If you’re not taking advantage of your home office deduction then you are leaving money on the table.
There are many expenses that you can deduct from having a home office
- Renters Insurance
- Internet Cost
- Homeowners Association Fees
- Repairs and Maintenance (direct cost means that it benefits the home office and not the home which would be an indirect cost)
- Dedicated business phone line or cell phone
Home office deductions are based on the square footage of your home, and follow the IRS guidelines when making those deductions.
The key to claiming home based business deductions is separating business and personal expenses and keeping separate files and bank accounts.
Knowledge is important when running your home based business here a publication from the IRS website on Business Use Of Your Home.
If your business has been negatively impacted by the Covid-19 pandemic there is help.
The CARES Act
The Corona virus Aid, Relief, and Economic Security (CARES) Act is a $2 trillion stimulus bill that was signed into law on March 27, 2020, to slow the economic downturn caused by the global corona virus pandemic.
If you are self-employed and not covered by your spouse’s health plan, you can deduct all of your medical and dental premiums.
This is where excellent record keeping must come in. You must record mileage for business trips, anything business related has to be documented and the purpose for each trip.
The 2019 rate for miles driven is 58 cents per mile for business purposes, up from 54.5 cents from 2018; 14 cents per mile for charitable purposes, unchanged from 2018; and 20 cents per mile for medical and moving purposes, up from 18 cents from 2018.
Having business insurance is important to ensure your business and you put your business at risk by not having your business covered. You can deduct the premium on your car if it is used mostly for the business.
Benefit # 5
Education and Training
In the saying is true knowledge is power, then using that knowledge to save money in your business is down right savvy. How many industry related conferences have you attended as well as your hotel fees and meals?
These are all business expenses and here is where a lot of entrepreneurs leave vast amounts of money on the table,
If you have employees and you pay for them to go to conferences to brush up on their skills or you purchase programs to sharpen their skills this is another avenue when you can have a tax benefit.
This can also include business online subscriptions.
Benefit # 6
I’m sure I’m not the only one who has done work for a client, only to be stiffed on the payment, or maybe they filed bankruptcy and defaulted on the payment agreement.
You can report that on your gross income for that year or the prior year, be sure to visit your local IRS website and check here for an article on Deducting Business Bad Debts.
There may come a time in your business where you will have to consult with another business owner or expert to grow your business, did you know that consultant fees are fully deductible, now there’s no excuse for you hiring the help you need while building your business.
Did you know you can write off your travel expenses for your flights, trains and car rentals. If you use Uber to get around for business travel you can write that off as well including the travel expenses for family members who work for the business.
Keep well organised records of your receipts such as your gas, tolls and parking fees.
Benefit # 9
How impressed will your customers be when you send them a gift during a special occasion or just to say thank you.
The minimum amount you can deduct is $25 per person make sure to check with your local IRS website to ensure what your deductions will be.
When you begin to realize the money you can save by having a home-based business, it’s a no-brainer to start your business today, and for those who are in business but had no knowledge of these deductions now is the time to keep any related business receipts so your no longer leaving money on the table.
As an entrepreneur you entered into business to make money not lose it so it’s important to be well informed in making your business work for you.
Choose Your Accountant Wisely
Although there are many tax benefits that you can claim as a home-based business, it is of the utmost importance to hire an account who has experience in all the deductions that you are entitled to.
The worst thing for your business is to go to these popular services where the tax preparer is only trained in standard employee deductions and not business deductions.
In my limited knowledge I went to one of these services and they did’t even know the industry code that my business fell under and when the tax preparer doesn’t know about business deductions you can be leaving vast amounts of deductions on the table.
This is why it is important to keep good records as well as receipts.
Whether you carry inventory or provide a service you need to have some type of accounting software that will keep your records organized for the tax season.
Quick-books is a great software when keeping track of, payroll, business expenses, and inventory.
Ask other entrepreneurs can they refer you to an accountant that is knowledgeable in business deductions or join Facebook groups to get educated on the many deductions you can take as a home-based business.
Here is a resource that I found to be a great source of information, Karla Dennis has a blog that you can visit to stay informed on the latest tax changes.
As seen in Forbes Magazine, Karla Dennis is an expert tax and business strategist.
As an enrolled agent, Karla is licensed to represent taxpayers in all 50 states.
She holds a Masters in Taxation and Business Development and is the author of two books, Tax Storm and Against the Odds.
Now that you are armed with the benefits of starting a home-based business there is nothing holding you back so go and create something that will change the lives of those you serve.