Home Business Tax Deduction Bonanza

Home Business Tax Bonanza

This is one subject that does not get enough air time… maybe its our fear of the income tax system, maybe our lack of understanding tax laws or, maybe no one really took the time to mention it. Tax deductible home business expenses is the same as having money in the bank. If you are not keeping track of your available small business/home business tax deductions listen up! The amount you are leaving on the table is probably enough to cover your home business start-up costs. Believe it or not the majority of us lose out simply because we can’t be bothered to keep track, we can’t be bothered to stick the receipt in to an envelope at the end of the day. If money really means that little to you stop reading now.

Home Business Tax Deductions in Canada

Todd doesn’t realize it yet but deciding to start his home business with his ‘Dated Business Plan’ he immediately received a tremendous amount of help and support in the way of tax deductible business expenses. Tax deductible expenses that in Todds case will be in the neighborhood of 12 – 15,000 dollars a year! That’s huge… it turns out the ability to claim home office expenses is a very big selling advantage for the home entrepreneur.

How much you can deduct depends on how much of your house your home office occupies. If the home office occupies a tenth of the square footage of the total home area (excluding hallways, bathrooms and kitchens), then a tenth of the home’s expenses can be deducted. (In Quebec, only 50 per cent of eligible home maintenance expenses can be deducted). Some of the eligible expenses for the self-employed crowd include:

Utilities (heat, electricity, water, gas).
Property taxes.
Home insurance.
Mortgage interest (but not principal).
Condo fees and rent.

Home office expenses that are specifically related to the home-based business don’t need to be pro-rated; they can be deducted in full. A business phone, printer paper, and toner cartridges would fall into this category. Those are some of the more obvious business expenses. But there are others. Website costs and maintenance, education and training costs, convention travel, automobile maintenance and repairs, insurance, and on and on.

But in order to take advantage of these available tax write offs Todd understands the importance of keeping some pretty accurate tax records. Everything Todd spends or earns in relation to his home business will be accounted for by time and date. Automobile expenses is another tax area that is often mismanaged, costing the home businesses thousands of dollars. Todd will make sure to keep a vehicle expense log in his car. Lets hope he keeps it up to date. It embarrassing to tell the tax man you misplaced it! Good bye tax write off. Keep meticulous expense records, if your ever audited… you will be glad you did.

Home business Tax Deductions in the USA

To be honest since I got out of the financial planning field, I have not kept up to date with the latest tax laws in the United States. However, I do recommend that you get informed and start keeping records of all your expenses, date them and stuff them in an envelope, and keep them for tax time. Every piece of paper in that expense folder represents money in your pocket.

A home business is not a hobby. It is business and has to be treated that way. Do yourself a favor and get yourself a record keeping system, it is tax deductible after all.

Downloads:

Todd Millhouse Watts-Business Plan
2010 Vehicle Log

to be continued… Todd’s Second Income System

Todds learning fast that a home business has to be taken seriously. The expectation of success improves as Todd and Mini Watts complete each and every step of their business plan, and that includes keeping track of their home business expenses.

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