In keeping with the tax deduction theme of the previous blog, I thought it would be good to share with everyone typical things one can deduct at the end of the year. It is always wise to check with a tax adviser for specific deductions for your type of home based business.
If your home based business is a franchise such as Avon, Mary Kay, Watkins, etc. where you have to purchase a kit or it involves franchise fees, the materials and or fees required to start up business can be deducted from your taxes.
Any supplies you use for your business also are tax deductible. This includes business cards, paper, receipts, physical advertisement, etc. These are tangible items, not services. Save all receipts for any purchases of anything tangible that you use that is business related. This also includes all postage used to perform business including shipping fees and supplies such as boxing and filler.
Non-tangible items are services. When you enlist the services of others that is business related, for example, if you hire someone to design an advertisement layout, run a newspaper ad, help in marketing, repair work, etc., those are non-tangible services that are tax deductible. Make sure when you save the receipts they specify exactly what services were provided.
Donations are also tax deductible. If you give away promotional freebies you can write that off as well as if you perform a service for free as a promotion or charity. Items donated in the name of your business for charity of any form or money are also tax deductible.
If your home based business is based off the internet or phone or both, the phone line used for business as well as the internet bill are tax deductible. If you use a cell phone for business, it too can be written off. Make sure you can document such and save all receipts. Any long distant calls that are business related also can be deducted from your taxes. Your computer as well as any software you purchase also can bring a tax deduction. After the purchase of a computer, you can claim depreciation for up to three years.
It is obvious tat your home based business is based out of your home; however, many do not realize that the space they use to perform their business is also tax deductible. I have changed my family den into my “business area” or office. It is where I perform all my functions within my home and is typically off limits from family use.
Okay, say you have a problem with customers who enlist your service or purchase your product and their checks bounce. First off, as many know, bad checks can hurt you two folds, loss in pay as well as extra charges incurred through the bank. Id you know that these bank charges as well as your loss can be deducted from your taxes? Keep documentation of bank charges and returned checks and make sure you claim them at the end of the year.
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Thanks for the run through of what is covered and what is not. This is the first year and I was not looking forward to taxes. Now I feel like I'm ready to tackle them. I didn't want to have to pay someone else to do them.
ReplyDeleteLet's face it, without deductions of some kind, too much of our money is going to the governnment. At the same time, you need to make sure the deductions you do take are legal. You don't want to be at odds with Uncle Sam.
ReplyDeleteI suck at saving receipts. I find them everywhere and I know that I throw a lot of them away. I need to get into the habit of keeping every one of them in the same place. I wish I was more organized. That's the bane of my existence.
ReplyDeleteGreat tips! I know when my account told me everything I could deduct I almost felt like I was doing something illegal! LOL!
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