July 27, 2021

Save Money on Your Taxes

You know that working from home can be satisfying but did you know that it could also save you money? Beyond the obvious savings like commuting costs, clothing and such you can also take considerable savings on your income taxes.

Home Deductions

When you work from home, there are tax deductions that you can take for using your home for business. There are sometimes complex rules that govern the use of these credits. Let’s look at some potential savings and a few of the regulations surrounding them.

– Office- If you operate a business from home chances are you have an office. You are allowed to depreciate the office portion of your mortgage or rent. Your office must be entirely separate from the rest of the home and be used exclusively for work and or meeting clients or patients.

If your office meets the guidelines, calculate the deduction by getting the percentage of space your office takes up. For instance, if your office is 20% of your home’s total square footage, then you will be allowed roughly 20% of your mortgage as a deduction.

– Business Use of Home- In addition to the home office mortgage deduction you can also deduct repairs, insurance and utilities. This deduction is a little trickier as you will need to determine if it is a direct or indirect expense. The resulting deduction will be a percentage based on this information. It is important that you seek professional assistance as these forms and calculations can be complex.

More Deductions on Schedule C

While the deductions you can take for your home office can be substantial, there are also everyday business expenses that you can claim on schedule C.

– Supplies- Anything that you use exclusively for business can be deducted as an office expense. Paper, staples, envelopes, and even stamps can all be calculated on your schedule C. You need to keep good records and even receipts in a separate file. When you do your taxes, you may not be required to show them; however, you will need them for a potential audit.

– Advertising- Need to get the word out about your home business? Your advertising dollars are deductible.

– Employee Expenses- Obviously you can deduct your employee’s wages, but you can also deduct employee benefits.

– Meals- Certain meals are tax deductible if they are work-related.

– Employ your Children- Are you giving your bundle of joy an allowance every week? Why not “employ” him or her and be able to deduct it on your taxes? This will mean they actually must do some work, empty the trash, and clean the office or if they are older file paperwork.

Anything that pertains to business that they are qualified to carry out is an opportunity for you to employ them. Not only are you saving money with your home based business, you are teaching your children a vital lesson about working and earnings. Money savings with a moral bonus; what could be better than that?

Working at home has many benefits; you have the freedom of setting your own hours and doing what you love. While you are in this pursuit of happiness, do not overlook the many ways you can save money. Uncle Sam has made many provisions to make it more profitable for the home based business owner.