Deductions ripe for the taking.
The rat race takes place every morning, where people wake up, commute to work, do their 8 hours and commute back home. For those who can’t telecommute and have to go to an office or cubicle every day, the task of commuting to work twice a day can be a taxing one.
But for those who don’t have to be pinned down to an offsite location on a daily basis, working out of home can be very convenient. Lawyers, public relations professionals and architects are some who can work out of home, if they have the space and equipment.
This year has seen multiple reasons why people might want to start a home-based business: gas prices skyrocketed to an average peak of $3.98 a gallon, unemployment hasn’t gone down much at all and some, like new parents, just want to stay closer to family. If you’re lucky enough to wake up steps from where you work, then Uncle Sam has some tax benefits for you.
To claim a business deduction for your home, the IRS states that you have to use a portion of your home exclusively and regularly as your principal place of business or as a place where you meet or deal with your clients, patients or customers in the normal course of that business.
You may think you need a full room devoted to your job, but think again. You only need a portion of a room to be your home office, and that portion can be deductible. Just measure the work area and divide it by the total square footage of your home. The percentage you calculate is what you can claim for home-related business expenses (utilities, mortgage, insurance, etc).
Make sure to keep receipts for the business supplies you buy, as they’ll offset your taxable business income. For office furniture, you can deduct the entire cost the year of purchase or deduct a portion of it over a seven-year depreciation period. Electronic equipment such as copy and fax machines, scanners and computers can also be written off the same way, but have a five-year depreciation period.
There are other deductions, too. Software can be fully expensed the year of purchase, as well as business/industry-related magazine subscriptions. You can even write off business calls from home. Just make sure to note them in the monthly bills, keep copies and deduct the total at tax time (regular fees and charges are ineligible, except if you have a second line solely used for your business).
If you own your own business, deducting expenses every April is a smart move. Another smart move is hiring a tax attorney if you end up owing back tax debt to the IRS. You may think you can handle the IRS on your own, but you’ll want a tax attorney to zealously represent you in U.S. Tax Court. It’s the best way to avoid a wage garnishment or bank levy and help you resolve your tax debt once and for all.
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