Introduction
If you are among the millions of Americans who own a home-based business you will be glad to note that there are special rules regarding taxes that will be applicable to you. You can do the following things in order to take advantage of the tax status of your home-based business.
The 5 things to know
The first thing that you can do is to deduct part of your housing costs as part of your business expenses. Your house rent can be deducted as a business expense, or if you have taken out a mortgage you can deduct part of your monthly payments.
To qualify for such deductions the house must be the principal place in which you conduct your business. This means that it has to be the place where administrative duties such as recordkeeping and scheduling are done. You should not have another fixed location for your business apart from your home. Your home must also be the place where you exclusively and regularly conduct your business. What this means is that your kitchen table cannot be used as your office desk during the day, and then be converted to a dining table in the evening. The space has to be exclusively used as your office space.
In general, you are allowed to deduct part of your home expenses. For instance, if you have a home that is 5,000 square feet and the room that you use as an office is 500 square feet, then it means that you can deduct 10% of your home expenses as your business expense. It might be useful for you to photograph your office space and add it to your tax records in case people from the Internal Revenue Service question your setup.
There are special rules that you can rely on if you want to deduct some of your home expenses as part of your business expenses. For instance if you use your home as a day care center you meet the requirements of state licensing. If you use your home as a storage facility for your business inventory you can also take advantage of tax laws.
The other thing that you can do is to deduct your travelling costs if you use your personal car to travel to a location where you are conducting business. The mileage that you use from your doorstep to the business location is tax-deductible once it has been established that your home is the place where you conduct your business.
Driving for your business can include activities such as driving to meet clients, customers or patient. Driving to meet suppliers or vendors or to go to the bank can also be deducted from your tax. You will need to keep records of your driving activities in order to take advantage of this provision. You can also deduct the cost of your Personal Computer if more than 50% of its use is for business. You can also take into consideration the impact that your home-based business will have on the value of your home if you intend to sell it.
