How to Legally Make the Most of Your Home-Based Business Tax Deductions. It’s estimated that there are more than 20 million home-based business owners in the United States. (US Bureau of Labor Statistics) Incredibly, some estimates are even double this amount! It’s also estimated that by the end of this decade, as many as 5 in 10 people will work from home. Stick that in your pipe and smoke it!
Rapid advances in technology are leveling the playing field and making it an attractive option for entrepreneurs. Surely the tax advantages of home business ownership is also contributing to the explosion of growth in this industry.
Below is a GENERAL list of the areas in which you can legally take advantage of the federal government and make the most of your home-based business tax status. As always, it’s strongly recommended that you keep all your receipts and maintain accurate business records, and consult a trusted tax professional for advice specific to your particular situation.
ITEMS YOU CAN DEDUCT:
A portion of your rent or mortgage – your business has to pay rent and that includes home-based businesses. Some of the amount that you pay each month in rent or mortgage payments can be counted as a business expense.
- The cost of your computer – laptop, tablet, etc.
- The cost of office equipment and furniture – office desk, office chair, computer, software, printer, lighting, etc.
- Internet connection, wireless router
- Monthly service fees for phone and cable, etc.
- Business travel – You can deduct a portion of the cost of plane tickets, hotel expenses, food, entertainment, etc.
- Business entertainment/meals – You can deduct the cost of entertaining customers, clients, prospects and anyone you talk to about your home based business.
- Groceries – Your home office needs some food for visitors. You may require food for home events and visitors which is a legitimate deduction.
- Car expenses, mileage, etc. – this deduction is calculated based on the distance from your home business – in this case, your front door.
- Monthly recurring Auto-ship (products)
According to the IRS: In order for a home business expense to be deductible it must be both “ordinary” and “necessary.” An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.
In the case of Network Marketing you typically have an auto-ship/auto-delivery as part of your requirement to be in business aka “earn commissions”. It is required of every member and it’s designed this way to meet the government requirement to sell products, vs recruitment of people. Therefore your monthly personal product is also deductible!